Basis: Section 10.1-1308 of the Code of Virginia authorizes the State Air Pollution Control Board to promulgate regulations abating, controlling, and prohibiting air pollution in order to protect public health and welfare. Written assurance from the Office of the Attorney General that the State Air Pollution Control Board possesses the statutory authority to promulgate the proposed regulation amendments is available upon request.

State Requirements: Executive Directive 11 (2017), "Reducing Carbon Dioxide Emissions from the Electric Power Sector and Growing Virginia's Clean Energy Economy," directs the Director of the Department of Environmental Quality, in coordination with the Secretary of Natural Resources, to take the following actions in accordance with the provisions and requirements of Chapter 13 (§ 10.1-1300 et seq.) of Title 10.1 of the Code of Virginia and Chapter 40 (§ 2.2-4000 et seq.) of Title 2.2 of the Code of Virginia:

1. Develop a proposed regulation for the State Air Pollution Control Board's consideration to abate, control, or limit CO2 from electric power facilities that:

a. Includes provisions to ensure that Virginia's regulation is "trading-ready" to allow for the use of market-based mechanisms and the trading of CO2 allowances through a multi-state trading program; and

b. Establishes abatement mechanisms providing for a corresponding level of stringency to limits on CO2 emissions imposed in other states with such limits.

2. By no later than December 31, 2017, present the proposed regulation to the State Air Pollution Control Board for consideration for approval for public comment in accordance with the board's authority pursuant to § 10.1-1308 of the Code of Virginia.

Purpose: The regulation is needed to control CO2 emissions in order to protect the public's health and welfare. The proposed regulation is being developed in order to meet the directives of Governor McAuliffe's Executive Directive 11 (2017), "Reducing Carbon Dioxide Emissions from the Electric Power Sector and Growing Virginia's Clean Energy Economy," which states:

There is no denying the science and the real-world evidence that climate change threatens the Commonwealth of Virginia, from our homes and businesses to our critical military installations and ports. Rising storm surges and flooding could impact as many as 420,000 properties along Virginia's coast that would require $92 billion of reconstruction costs.

The challenges and costs of bolstering resilience and minimizing risk are too great for any locality to bear alone. While the impacts are significant, there are technologies in the clean energy sector that could help mitigate these impacts while simultaneously creating jobs in twenty-first century industries. The number of solar jobs in Virginia has grown by 65 percent in the last year alone, and Virginia is now the ninth fastest growing solar jobs market in the country. Revenue for clean energy businesses in Virginia has increased from $300 million in 2014 to $1.5 billion in 2016. Through state leadership, Virginia can face the threats of climate change head on and do so in a way that makes clean energy a pillar of our future economic growth and a meaningful part of our energy portfolio.

With these considerations in mind, I issued Executive Order 57 (EO 57) on June 28, 2016. Under EO 57, I directed the Secretary of Natural Resources to convene a work group to study and recommend methods to reduce carbon dioxide emissions from electric power facilities and grow the clean energy economy within existing state authority. The group consisted of the Secretary of Natural Resources, the Secretary of Commerce and Trade, the Director of the Virginia Department of Environmental Quality, the Director of the Virginia Department of Mines, Minerals and Energy, and the Deputy Attorney General for Commerce, Environment, and Technology. This group facilitated extensive stakeholder engagement over the last year, including six in-person meetings and a ninety-day public comment period, before compiling its recommendations and submitting a final report to me on May 12, 2017.

Among the most significant recommendations from the group is the need to develop regulations limiting the total amount of carbon dioxide emitted from electric power facilities. Given the nature of the climate change threat and the promise of clean energy solutions, I agree with this recommendation.

Accordingly, pursuant to the authority vested in me as the Chief Executive Officer of the Commonwealth, and pursuant to Article V of the Constitution and the laws of Virginia, I hereby direct the Director of the Department of Environmental Quality, in coordination with the Secretary of Natural Resources, to take the following actions in accordance with the provisions and requirements of Virginia Code § 10. 1-1300, et seq. and Virginia Code § 2.2-4000, et seq.:

1. Develop a proposed regulation for the State Air Pollution Control Board's consideration to abate, control, or limit carbon dioxide emissions from electric power facilities that:

a. Includes provisions to ensure that Virginia's regulation is "trading-ready" to allow for the use of market-based mechanisms and the trading of carbon dioxide allowances through a multi-state trading program; and

b. Establishes abatement mechanisms providing for a corresponding level of stringency to limits on carbon dioxide emissions imposed in other states with such limits.

2. By no later than December 31, 2017, present the proposed regulation to the State Air

Pollution Control Board for consideration for approval for public comment in accordance with the Board's authority pursuant to Virginia Code § 10. 1-1308.

Additionally, Executive Order 57 Work Group's "Report and Final Recommendations to the Governor" states that:

The Work Group received a number of presentations and written comments from stakeholders advocating for a regulation to limit carbon dioxide from power plants. These comments included recommendations that the Commonwealth join or participate in the Regional Greenhouse Gas Initiative (RGGI) or another regional trading program, that a price be put on carbon, and that Virginia strive to reduce its greenhouse gases by 30 to 40 percent by the year 2030. . . . Although many stakeholders provided feedback focused on specific in-state targets (such as 30x30), the Work Group believes that it is important and necessary that Virginia work through a regional model, like the established and successful RGGI, in order to achieve lower compliance costs and address the interstate nature of the electric grid.

The Work Group recommends that the Governor consider taking action via a regulatory process to establish a "trading-ready" carbon emissions reduction program for fossil fuel fired electric generating facilities that will enable participation in a broader, multi-state carbon market.

Substance:

1. The primary purpose of the proposed regulation is to implement a declining cap on carbon emissions. The administrative means of accomplishing this will be effected by linking Virginia to the Regional Greenhouse Gas Initiative, which is an established emissions trading program. An allowance will be issued for each ton of carbon emitted by an electricity generating facility. The company must then decide if it will reduce carbon emissions and sell the resulting additional allowances, or if it will not reduce carbon emissions and make up the difference with purchased allowances. The proposal includes two options on the base budgets, 33 million tons and 34 million tons, which will determine, based on a 3.0% annual reduction, the annual budgets and allocations for future years.

2. The mechanism for determining the cost of allowances will be a consignment auction.

3. A cost containment reserve allowance will be offered for sale at an auction for the purpose of containing the cost of CO2 allowances in the event of higher than anticipated emission reduction costs. An emission containment reserve allowance will be withheld from sale at an auction for the purpose of additional emission reduction in the event of lower than anticipated emission reduction costs.

4. Monitoring, recording, and recordkeeping requirements will be implemented to track compliance.

5. Conditional allowances will be allocated to the Department of Mines, Minerals and Energy in order to assist the department for the abatement and control of air pollution, specifically, CO2.

Issues: The primary advantage to the public would be health and welfare benefits associated with controlling carbon pollution. The program is designed to avoid any significant economic impacts.

No significant advantages or disadvantages to the department can be identified. There may be a minor impact in terms of administering a new program.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Air Pollution Control Board (Board) proposes to establish the CO2 Budget Trading Program in regulation.

Estimated Economic Impact.

Background:

Governor McAuliffe's Executive Directive 11 (2017)1 directed the Director of the Department of Environmental Quality (DEQ), in coordination with the Secretary of Natural Resources, to:

Develop a proposed regulation for the State Air Pollution Control Board's consideration to abate, control, or limit carbon dioxide emissions from electric power facilities that:

a. Includes provisions to ensure that Virginia's regulation is "trading-ready" to allow for the use of market-based mechanisms and the trading of carbon dioxide allowances through a multi-state trading program; and

b. Establishes abatement mechanisms providing for a corresponding level of stringency to limits on carbon dioxide emissions imposed in other states with such limits.

The Board's proposed CO2 Budget Trading Program is designed to meet the requirements of Executive Directive 11.

Further, the Work Group established by Governor McAuliffe's Executive Order 572to study and recommend methods to reduce carbon emissions from electric power generation facilities concluded in their final report "that it is important and necessary that Virginia work through a regional model, like the established and successful [Regional Greenhouse Gas Initiative], in order to achieve lower compliance costs and address the interstate nature of the electric grid." Thus the proposed regulation specifies participation in the Regional Greenhouse Gas Initiative (RGGI).

Regional Greenhouse Gas Initiative:

RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce power sector carbon dioxide (CO2) emissions. RGGI is composed of individual CO2 Budget Trading Programs in each participating state. Through independent regulations, each state's CO2 Budget Trading Program limits emissions of CO2 from electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions. Regulated power plants can use a CO2 allowance issued by any participating state to demonstrate compliance with an individual state program. In this manner, the state programs, in aggregate, function as a single regional compliance market for CO2 emissions.

Virginia's CO2 Budget Trading Program:

Under the proposed regulation, fossil fuel-fired stationary boilers, combustion turbines, or combined cycle systems that serve an electricity generator with a nameplate capacity equal to or greater than 25 electrical megawatts are considered CO2 budget units. Any source3 that includes one or more such units is a CO2 budget source, subject to the requirements of the regulation. The owners and operators of each CO2 budget source and each CO2 budget unit at the source must hold CO2 allowances for at least the amount of CO2 emitted for the relevant time period. Fossil fuel power generating units owned by an individual facility and located at that individual facility that generates electricity and heat from fossil fuel for the primary use of operation of the facility are exempt from the requirements.

For the first year of Virginia's CO2 Budget Trading Program, 2020, the intent is to allocate to each source conditional allowances approximately equal to the number of tons of CO2 emitted by their units. The allowances are called "conditional" because the sources cannot just hold on to and use the allowances; the allowances must be sent to the consignment auction. The consignment auction is the quarterly RGGI regional CO2 allowance auction where anyone can bid for the allowances. The allowances can be used by any regulated power plant (source) in any of the RGGI states. Similarly, Virginia sources can use allowances that either originated in Virginia or any other RGGI state.

If a Virginia source intended to emit fewer tons of CO2 than it received in conditional allowances, then the source would purchase fewer allowances (through the auction) than it had auctioned off, and would earn the auction price per ton times the net number of tons it sells (minus a small fee kept by RGGI for administrative costs). A Virginia source that intended to emit exactly the number of tons of CO2 it was allotted would buy back the same number of allowances it brought to the auction and would break even (minus the administrative fee). A source that planned to emit more CO2 than it received in conditional allowances would purchase the number of allowances it needed and pay the auction price times the number of tons beyond its allotted number.

For 2020, the proposed regulation specifies a Virginia base budget of either 33 million or 34 million tons of CO2 allowances. (The proposed text at the Proposed Stage of this regulatory action includes the following: "Editor's Note: Two versions … are provided for comment. The board seeks comment on whether the base budget should be 33 million tons or 34 million tons, with corresponding 3% per year reductions.") The base budget declines by about 1 million tons of CO2 allowances per year thereafter until 2030. Of the base budget, 95% is allocated to CO2 budget sources and the remaining 5% is allocated to the Department of Mines, Minerals and Energy (DMME) to assist DEQ in the abatement and control of air pollution, specifically CO2.

The proposed Virginia CO2 Budget Trading Program includes mechanisms designed to ensure that the allowance price remains within a set range. Details concerning those mechanisms can be found in Appendix I.

Impact - Benefit of CO2 Emission Reduction:

The Report of the Executive Order 57 Work Group4 identifies several Virginia-specific environmental and economic harms that result from CO2 emissions:

• According to data compiled by the Georgetown Climate Center and Old Dominion University's Mitigation and Adaptation Research Institute, the Commonwealth has already seen a 33 percent increase in heavy rainstorms and snowstorms in the last sixty years, as well as an 11 percent increase in precipitation from the largest storms.5 The same report found that as many as 400,000 Virginia homes are at risk of damage from increased storm surges.

• Climate change also has the potential to endanger the agricultural sector. Half of Virginia's counties face increased risk of water shortages by 2050 as the result of climate-related shifts in precipitation and weather.6

• Other business sectors are similarly feeling the impacts of climate change as warmer temperatures affect worker productivity and the health of the workforce.7

Thus, reducing CO2 emissions has the potential to benefit the Commonwealth.

The U.S. Environmental Protection Agency (EPA) and other federal agencies use estimates of the social cost of carbon (SC-CO2) to value the climate impacts of regulatory rulemakings.8 The SC-CO2 is a measure, in dollars, of the long-term damage done by a ton of CO2 emissions in a given year. This dollar figure also represents the value of damages avoided for a reduction of a ton of CO2 emissions in a given year (i.e., the benefit of a CO2 reduction). It should be noted that the federal model estimates of the social cost of carbon are for the world overall.9 Thus it is not possible to quantify the Virginia-specific benefits.

The SC-CO2 is meant to be a comprehensive estimate of climate change damages and includes, among other things, changes in human health, property damages from increased flood risk, net agricultural productivity, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. However, according to the EPA, the federal SC-CO2 estimates omit various impacts that likely would increase damages. The models used to develop SC-CO2 estimates do not currently include all of the physical, ecological, and economic impacts of climate change recognized in the literature because of a lack of precise information on the nature of damages and because the science incorporated into these models naturally lags behind the most recent research. Nonetheless, current estimates of the SC-CO2 are a useful measure to assess the climate impacts of CO2 emission changes. Details about the federal model SC-CO2 estimates and their development can be found in Appendix II of this report.

By design, under Virginia's proposed CO2 Budget Trading Program, CO2 emissions are reduced by about 1 million tons per year from 2020 to 2030. If a 3% discount rate is assumed,10 then the benefit of a CO2 reduction by about 1 million tons in 2021 versus 2020 would be about $42 million, while the benefit of a CO2 reduction by about 1 million tons in 203011 would be about $50 million.12The estimated cumulative benefit for the ten years of CO2 reduction would be about $460 million. The assumed discount rate makes a large difference in the estimated benefit. If a discount rate of 2.5% a year is used rather than 3%, then the estimated cumulative benefit for the ten years of CO2 reduction would be about $680 million. On the other hand, using a discount rate of 5% a year rather than 3% results in an estimated cumulative benefit for the ten years of CO2 reduction of about $140 million.13

Impact - Benefit of Incidental Reductions in SO2 and NOx:

Air pollutants such as sulfur dioxide (SO2) and nitrogen oxides (NOx) are co-produced along with CO2 emissions from fossil-fuel power plants. SO2 and NOx can form particulate matter. Exposure to particulate matter can adversely affect the lungs and heart, leading to premature death in people with heart or lung disease, nonfatal heart attacks, aggravated asthma, decreased lung function, and increased respiratory symptoms, such as irritation of the airways, coughing or difficulty breathing.14 In meeting CO2 reduction requirements, there would also be reductions in SO2 and NOx emissions.

EPA developed the Co-Benefits Risk Assessment (COBRA) model,15 to estimate the health co-benefits from the incidental reductions in SO2 and NOx emissions. EPA ran the COBRA model to analyze the effects if Virginia linked to RGGI and established its CO2 Budget Trading Program. The EPA used two sets of assumptions: the RGGI Scenario and the Virginia (VA) Scenario. Table 1a compares the two scenarios.

Because Virginia is not presently linked to RGGI, it does not include any future Virginia renewable power generation.

Based on Dominion Energy's Integrated Resource Plan. (Includes future Virginia renewable power generation such as solar).

Table 1b displays the COBRA model's estimates of the reduction in mortality from the reductions in SO2 and NOx emissions that would result from Virginia linking to RGGI and establishing the rules and requirements of Virginia's CO2 Budget Trading Program.19

Table 1b: Health Benefits20 of Incidental Reductions in SO2 and NOx

Year

Scenario

Tons NOx Reduction

Tons SO2 Reduction

Mortality (low estimate)

Mortality (high estimate)

2026

RGGI

11,169

2,424

5.2

11.9

2026

VA

6,317

1,636

3.2

7.3

2029

RGGI

10,851

2,551

5.3

12

2029

VA

8,140

2,310

4.4

10

Impact - Electricity Consumers:

According to recent presentations by DEQ, the "revenue received by CO2 Budget Sources owned by regulated electric utilities flow to rate payers pursuant to State Corporation Commission (SCC) requirements."21 While not described in the regulation, this action is predicated upon anticipated actions of the SCC which it may or may not take. This assumed action was incorporated in estimates DEQ provided the Board, which indicate the impact that the proposed Virginia CO2 Budget Trading Program22would have on the average monthly electricity bills for residential, commercial, and industrial consumers (Table 2).23

Note: The estimates in Table 2were produced by the Analysis Group, using the Integrated Planning Model developed by ICF. This was the only model available to DPB during the time period for this review, and DPB lacked the resources to verify the model or its assumptions. If the SCC resumes rate reviews, these assumptions should be reconsidered.

The reference case refers to the model's forecasts of electric bills without the adoption of the regulation and implementation of the Virginia CO2 Budget Trading Program. In contrast, by 2031 the model's forecasts of electric bills resulting from adoption of the regulation increase by 0.7% to 1.1% using the RGGI assumptions, and by 0.3% to 0.5% using VA assumptions (in real dollars).

Impact - Electricity Producers:

The proposed regulations restrict CO2 emissions by electricity producers. Electricity producers who find the restrictions binding, i.e. they would have emitted more than their allotted allowances without the restrictions, would need to combine finding alternative methods of producing electricity and purchasing additional allowances. The alternative methods would presumably be more expensive, otherwise the restrictions would not have been binding. Firms in this position would encounter increased costs due to the proposed regulation.

Electricity producers who do not find the restrictions binding can potentially profit by selling allowances that they do not need. Firms that had planned to emit fewer tons of CO2 than they were allotted would fall into this category.

Assuming that all revenues raised from the auction by regulated utilities are returned to ratepayers, then these producers will not profit, because they cannot keep their sales revenue. Table 3 lists forecasted prices per ton of allowances in nominal dollars for specified years using both the RGGI and VA scenario assumptions.

Given the proposal to limit CO2 emissions to 33 million tons in 2020, and that 5 percent of the emissions are allotted to DMME, 31.35 million tons of emissions would be allotted to sources in 2020. Based on the forecasted prices of $6.08 and $6.48 per ton, sources would spend approximately $191 million to $203 million for CO2 emission allowances for the year 2020. Since the 2020 base budget is intended to be close to the amount of emissions actually being generated at that time, in net sources would not initially face significant additional costs from finding alternative lower-emitting but higher cost means of generating electricity.

Taking into account the annual reduction in the Virginia base budget in the proposed regulation and DMME's share of the base budget, 28.53 million tons of emissions would be allotted to sources in 2023. Based on the forecasted prices of $7.24 and $7.71 per ton, sources would spend approximately $207 million to $220 million for CO2 emission allowances for the year 2023. Since the 2023 base budget is smaller than the 2020 base budget, and the demand for electricity is unlikely to fall, sources likely would need to find alternative, lower-emitting means of generating electricity.

Following the same reasoning, the source allotments for 2026 and 2029 would be 25.71 million tons and 22.89 million tons, respectively; and based on the forecasted prices of $9.02 to $ 9.60 and $10.74 to $11.44 per ton, sources would spend approximately $232million to $247 million in 2026 and $246 million to $262million in 2029 on CO2 emission allowances. Given the further contraction in the base budget of allowances, sources would need to find alternative, lower-emitting means of generating electricity.

Impact - Fiscal:

The Joint Legislative Audit and Review Commission (JLARC) estimates that the fiscal impact (negative and positive) of the proposed regulation (in 2017 dollars) will be "approximately - $1.3 million in 2020, when the regulation would take effect, and [will] be $1.9 million in 2031, the last year in which information is available to develop an estimate."24 JLARC notes that the latter cost equates to approximately one percent of projected state electricity costs in 2031, and that the majority of this impact would be due to an increase in electricity costs for public higher education institutions, which represented 70 percent of total electricity costs for state entities in FY17. Impacts are estimated as the difference between electricity costs under the proposed regulation pursuant and electricity costs if the regulation was not adopted.

JLARC estimates that the cost to DEQ for administering the regulation and the cap and trade program would be approximately $95,000 per year to cover the salary and benefits for one staff position.25 According to JLARC, DEQ staff indicated that the anticipated responsibilities of this staff person would include collecting and analyzing information necessary to allocate allowances to electricity generators, participating in RGGI meetings and webinars, and managing all correspondence with RGGI. While monitoring and compliance should be handled automatically by the RGGI carbon dioxide allowance tracking system, this staff person would have responsibility for managing DEQ compliance actions for electricity generators that are substantially and consistently out of compliance. Additional resources could be necessary if there is frequent need for compliance action by DEQ.

JLARC also estimates that the cost to DMME for administering the allowances it receives each year is approximately $105,000 to cover the salary and benefits for one staff position. This position would be an upper-level program manager responsible for establishing a program inventory that would maximize emission reductions. This position would manage a contract with a third-party administrator to sell the allowances allotted to DMME and make the funding available for use in a variety of programs to help reduce carbon dioxide emissions.

Businesses and Entities Affected. The proposed amendments particularly affect the 12companies that operate the 32electric power facilities with a capacity of >25 MW in the Commonwealth. All entities that use electricity, including industrial and commercial firms, farms, residences, government offices, schools and colleges, etc., are affected as well. All entities and people in Virginia would also likely experience the impact of environmental improvement.

Localities Particularly Affected. As CO2 emissions are reduced over time, the regulation is likely to have a positive impact on all localities.

Projected Impact on Employment. The proposed reduction in allowed emissions of CO2 over time may reduce employment associated with electricity production that is high in CO2 emission such as coal, and may increase employment in electricity production that is low in CO2 emission such as wind and solar.

Effects on the Use and Value of Private Property. It is difficult to estimate the effects of this regulation on the value of property. To the extent that the proposed amendments decrease flooding risk, and thus limit loss of use, the value of private property near bodies of water and other low-lying properties could become more valuable, or they could decline since it could cause the inventory of usable land to increase. Further, land values could increase in some areas as the demand for solar farms increases.

Real Estate Development Costs. The proposed amendments do not appear to significantly affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendments likely would increase electricity costs for small businesses, but environmental improvements may lower other costs. Based upon the assumptions used for the model results displayed in Table 2, monthly electric bills should not increase by more than 1.1% ($2015) by 2031 due to the proposed program.

Alternative Method that Minimizes Adverse Impact. There is no clear alternative method that would minimize the adverse impact for small businesses, while still achieving the intended policy goals.

Adverse Impacts:

Businesses. The proposed amendments likely would increase electricity costs for businesses. Based upon the assumptions used for the model results displayed in Table 2, monthly electric bills should not increase by more than 1.1% ($2015) by 2031 due to the proposed program. The proposed limitations on CO2 emissions for sources would increase electricity production costs for at least some electric power producing firms.

Localities. The proposed amendments likely would increase electricity costs for local governments. Based upon the assumptions used for the model results displayed in Table 2, monthly electric bills should not increase by more than 1.1% ($2015) by 2031 due to the proposed program.

Other Entities. The proposed amendments likely would increase electricity costs for homeowners, farms, state government, schools, colleges, and other entities. Based upon the assumptions used for the model results displayed in Table 2, monthly electric bills should not increase by more than 1.1% ($2015) by 2031 due to the proposed program.

3The proposed regulation defines source as "any governmental, institutional, commercial, or industrial structure, installation, plant, building, or facility that emits or has the potential to emit any air pollutant. A source, including a source with multiple units, shall be considered a single facility."

19The model estimates health benefits through reduced: mortality, various cardiovascular and respiratory ailments, and loss of work days. These estimates could not be verified by DPB staff within the timeframe for this review.

22That is, participation in RGGI and reductions in CO2 emissions, as stipulated in the proposed regulation.

23DEQ November 16, 2017 presentation before the Board, p. 43.

24JLARC's analysis, which was published on December 4, 2017, could not be verified by DPB staff within the timeframe for this review. JLARC notes that, "the fiscal impact is estimated to be negative in 2020 because it is expected that compliance will be easier in earlier years and electricity generators may hold or bank allowances that they do not need to reduce compliance costs in later years when the emissions cap decreases." Source: http://jlarc.virginia.gov/pdfs/fiscal_analysis/FIR/2017_ED11_review.pdf.

Agency's Response to Economic Impact Analysis: The department has reviewed the economic impact analysis prepared by the Department of Planning and Budget and has no comment.

Summary:

The proposed new regulation establishes the Virginia CO2 Budget Trading Program. The proposed regulation (i) implements a declining cap on carbon emissions and establishes an allowance that will be issued for each ton of carbon emitted by an electricity generating facility, which can then decide whether to reduce carbon emissions and sell the resulting additional allowances or not reduce carbon emissions and make up the difference with purchased allowances; (ii) establishes a consignment auction as the mechanism for determining the cost of allowances; (iii) provides that a cost containment reserve allowance will be offered for sale at an auction for the purpose of containing the cost of CO2 allowances in the event of higher than anticipated emission reduction costs and that an emission containment reserve allowance will be withheld from sale at an auction for the purpose of additional emission reduction in the event of lower than anticipated emission reduction costs; (iv) implements monitoring, recording, and recordkeeping requirements; and (v) allocates conditional allowances to the Department of Mines, Minerals and Energy.

The proposal includes two options on the base budgets, 33 million tons and 34 million tons, which will determine, based on a 3.0% annual reduction, the annual budgets, and allocations for future years.

Part VII CO2 Budget Trading Program

Article 1 CO2 Budget Trading Program General Provisions

9VAC5-140-6010. Purpose.

This part establishes the Virginia component of the CO2 Budget Trading Program, which is designed to reduce anthropogenic emissions of CO2, a greenhouse gas, from CO2 budget sources in an economically efficient manner.

9VAC5-140-6020. Definitions.

A. As used in this part, all words or terms not defined here shall have the meanings given them in 9VAC5-10 (General Definitions), unless otherwise required by the context.

B. For the purpose of this part and any related use, the words or terms shall have the meanings given them in this section.

C. Terms defined.

"Account number" means the identification number given by the department or its agent to each COATS account.

"Acid rain emission limitation" means, as defined in 40 CFR 72.2, a limitation on emissions of sulfur dioxide (SO2) or nitrogen oxides (NOX) under the Acid Rain Program under Title IV of the CAA.

"Acid Rain Program" means a multistate SO2 and NOX air pollution control and emission reduction program established by the administrator under Title IV of the CAA and 40 CFR Parts 72 through 78.

"Adjustment for banked allowances" means an adjustment applied to the Virginia CO2 Budget Trading Program base budget for allocation years 2021 through 2025 to address allowances held in general and compliance accounts, including compliance accounts established pursuant to the CO2 Budget Trading Program, but not including accounts opened by participating states, that are in addition to the aggregate quantity of emissions from all CO2 budget sources in all of the participating states at the end of the control period in 2020 and as reflected in the CO2 Allowance Tracking System on March 17, 2021.

"Administrator" means the administrator of the U.S. Environmental Protection Agency or the administrator's authorized representative.

"Allocate" or "allocation" means the determination by the department of the number of CO2 conditional allowances allocated to a CO2 budget unit or the Department of Mines, Minerals and Energy (DMME).

"Allocation year" means a calendar year for which the department allocates CO2 conditional allowances pursuant to Article 5 (9VAC5-140-6190 et seq.) of this part. The allocation year of each CO2 conditional allowance is reflected in the unique identification number given to the allowance pursuant to 9VAC5-140-6250 C.

"Allowance" means an allowance up to one ton of CO2 purchased from the consignment auction in accordance with Article 9 (9VAC5-140-6410 et seq.) of this part and that may be deposited in the compliance account of a CO2 budget source.

"Allowance auction" or "auction" means an auction in which the department or its agent offers CO2 allowances for sale.

"Alternate CO2 authorized account representative" means, for a CO2 budget source and each CO2 budget unit at the source, the alternate natural person who is authorized by the owners and operators of the source and all CO2 budget units at the source, in accordance with Article 2 (9VAC5-140-6080 et seq.) of this part, to represent and legally bind each owner and operator in matters pertaining to the CO2 Budget Trading Program or, for a general account, the alternate natural person who is authorized, under Article 6 (9VAC5-140-6220 et seq.) of this part, to transfer or otherwise dispose of CO2 allowances held in the general account. If the CO2 budget source is also subject to the Acid Rain Program, CSAPR NOX Annual Trading Program, CSAPR NOX Ozone Season Trading Program, CSAPR SO2 Group 1 Trading Program, or CSAPR SO2 Group 2 Trading Program then, for a CO2 Budget Trading Program compliance account, this alternate natural person shall be the same person as the alternate designated representative as defined in the respective program.

"Attribute" means a characteristic associated with electricity generated using a particular renewable fuel, such as its generation date, facility geographic location, unit vintage, emissions output, fuel, state program eligibility, or other characteristic that can be identified, accounted for, and tracked.

"Attribute credit" means a credit that represents the attributes related to one megawatt-hour of electricity generation.

"Automated Data Acquisition and Handling System" or "DAHS" means that component of the Continuous Emissions Monitoring System (CEMS), or other emissions monitoring system approved for use under Article 8 (9VAC5-140-6330 et seq.) of this part, designed to interpret and convert individual output signals from pollutant concentration monitors, flow monitors, diluent gas monitors, and other component parts of the monitoring system to produce a continuous record of the measured parameters in the measurement units required by Article 8 (9VAC5-140-6330 et seq.) of this part.

"Billing meter" means a measurement device used to measure electric or thermal output for commercial billing under a contract. The facility selling the electric or thermal output shall have different owners from the owners of the party purchasing the electric or thermal output.

"Boiler" means an enclosed fossil or other fuel-fired combustion device used to produce heat and to transfer heat to recirculating water, steam, or other medium.

"CO2 allowance deduction" or "deduct CO2 allowances" means the permanent withdrawal of CO2 allowances by the department or its agent from a COATS compliance account to account for the number of tons of CO2 emitted from a CO2 budget source for a control period or an interim control period, determined in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part, or for the forfeit or retirement of CO2 allowances as provided by this part.

"CO2 Allowance Tracking System" or "COATS" means the system by which the department or its agent records allocations, deductions, and transfers of CO2 allowances under the CO2 Budget Trading Program. The tracking system may also be used to track CO2 allowance prices and emissions from affected sources.

"CO2 Allowance Tracking System account" means an account in COATS established by the department or its agent for purposes of recording the allocation, holding, transferring, or deducting of CO2 allowances.

"CO2 allowance transfer deadline" means midnight of March 1 occurring after the end of the relevant control period and each relevant interim control period or, if that March 1 is not a business day, midnight of the first business day thereafter and is the deadline by which CO2 allowances shall be submitted for recordation in a CO2 budget source's compliance account for the source to meet the CO2 requirements of 9VAC5-140-6050 C for the control period and each interim control period immediately preceding such deadline.

"CO2 allowances held" or "hold CO2 allowances" means the CO2 allowances recorded by the department or its agent, or submitted to the department or its agent for recordation, in accordance with Article 6 (9VAC5-140-6220 et seq.) and Article 7 (9VAC5-140-6300 et seq.) of this part, in a COATS account.

"CO2 authorized account representative" means, for a CO2 budget source and each CO2 budget unit at the source, the natural person who is authorized by the owners and operators of the source and all CO2 budget units at the source, in accordance with Article 2 (9VAC5-140-6080 et seq.) of this part, to represent and legally bind each owner and operator in matters pertaining to the CO2 Budget Trading Program or, for a general account, the natural person who is authorized, under Article 6 (9VAC5-140-6220 et seq.) of this part, to transfer or otherwise dispose of CO2 allowances held in the general account. If the CO2 budget source is also subject to the Acid Rain Program, CSAPR NOX Annual Trading Program, CSAPR NOX Ozone Season Trading Program, CSAPR SO2 Group 1 Trading Program, or CSAPR SO2 Group 2 Trading Program, then for a CO2 Budget Trading Program compliance account, this natural person shall be the same person as the designated representative as defined in the respective program.

"CO2 budget emissions limitation" means, for a CO2 budget source, the tonnage equivalent, in CO2 emissions in a control period or an interim control period, of the CO2 allowances available for compliance deduction for the source for a control period or an interim control period.

"CO2 budget permit" means the portion of the legally binding permit issued by the department pursuant to 9VAC5-85 (Permits for Stationary Sources of Pollutants Subject to Regulation) to a CO2 budget source or CO2 budget unit that specifies the CO2 Budget Trading Program requirements applicable to the CO2 budget source, to each CO2 budget unit at the CO2 budget source, and to the owners and operators and the CO2 authorized account representative of the CO2 budget source and each CO2 budget unit.

"CO2 budget source" means a source that includes one or more CO2 budget units.

"CO2 Budget Trading Program" means the Regional Greenhouse Gas Initiative (RGGI), a multistate CO2 air pollution control and emissions reduction program as a means of reducing emissions of CO2 from CO2 budget sources.

"CO2 budget unit" means a unit that is subject to the CO2 Budget Trading Program requirements under 9VAC5-140-6040.

"CO2 cost containment reserve allowance" or "CO2 CCR allowance" means a CO2 allowance that is offered for sale at an auction for the purpose of containing the cost of CO2 allowances. CO2 CCR allowances offered for sale at an auction are separate from and additional to CO2 allowances allocated from the Virginia CO2 Budget Trading Program base and adjusted budgets. CO2 CCR allowances are subject to all applicable limitations contained in this part.

"CO2 cost containment reserve trigger price" or "CCR trigger price" means the minimum price at which CO2 CCR allowances are offered for sale at an auction. Beginning in 2020 and each calendar year thereafter, the CCR trigger price shall be 1.025 multiplied by the CCR trigger price from the previous calendar year, rounded to the nearest whole cent. The CCR trigger price in calendar year 2021 shall be $13. Each calendar year thereafter, the CCR trigger price shall be 1.07 multiplied by the CCR trigger price from the previous calendar year, rounded to the nearest whole cent, as shown in Table 140-1A.

Table 140-1A CO2 CCR Trigger Price

2020

$10.77

2021

$13.00

2022

$13.91

2023

$14.88

2024

$15.93

2025

$17.04

2026

$18.23

2027

$19.51

2028

$20.88

2029

$22.34

2030

$23.90

"CO2 emission containment reserve allowance" or "CO2 ECR allowance" means a CO2 allowance that is withheld from sale at an auction by the department for the purpose of additional emission reduction in the event of lower than anticipated emission reduction costs.

"CO2 emission containment reserve trigger price" or "ECR trigger price" means the price below which CO2 allowances will be withheld from sale by the department or its agent at an auction. The ECR trigger price in calendar year 2021 shall be $6.00. Each calendar year thereafter, the ECR trigger price shall be 1.07 multiplied by the ECR trigger price from the previous calendar year, rounded to the nearest whole cent, as shown in Table 140-1B.

Table 140-1B CO2 ECR Trigger Price

2021

$ 6.00

2022

$ 6.42

2023

$ 6.87

2024

$ 7.35

2025

$ 7.86

2026

$ 8.42

2027

$ 9.00

2028

$ 9.63

2029

$10.31

2030

$11.03

"Combined cycle system" means a system comprised of one or more combustion turbines, heat recovery steam generators, and steam turbines configured to improve overall efficiency of electricity generation or steam production.

"Combustion turbine" means an enclosed fossil or other fuel-fired device that is comprised of a compressor (if applicable), a combustor, and a turbine, and in which the flue gas resulting from the combustion of fuel in the combustor passes through the turbine, rotating the turbine.

"Commence commercial operation" means, with regard to a unit that serves a generator, to have begun to produce steam, gas, or other heated medium used to generate electricity for sale or use, including test generation. For a unit that is a CO2 budget unit under 9VAC5-140-6040 on the date the unit commences commercial operation, such date shall remain the unit's date of commencement of commercial operation even if the unit is subsequently modified, reconstructed, or repowered. For a unit that is not a CO2 budget unit under 9VAC5-140-6040 on the date the unit commences commercial operation, the date the unit becomes a CO2 budget unit under 9VAC5-140-6040 shall be the unit's date of commencement of commercial operation.

"Commence operation" means to begin any mechanical, chemical, or electronic process, including, with regard to a unit, start-up of a unit's combustion chamber. For a unit that is a CO2 budget unit under 9VAC5-140-6040 on the date of commencement of operation, such date shall remain the unit's date of commencement of operation even if the unit is subsequently modified, reconstructed, or repowered. For a unit that is not a CO2 budget unit under 9VAC5-140-6040 on the date of commencement of operation, the date the unit becomes a CO2 budget unit under 9VAC5-140-6040 shall be the unit's date of commencement of operation.

"Compliance account" means a COATS account, established by the department or its agent for a CO2 budget source under Article 6 (9VAC5-140-6220 et seq.) of this part, in which are held CO2 allowances available for use by the source for a control period and each interim control period for the purpose of meeting the CO2 requirements of 9VAC5-140-6050 C.

"Conditional allowance" means an allowance allocated by the department to CO2 budget sources and to DMME. Such conditional allowance shall be consigned by the entity to whom it is allocated to the consignment auction as specified under Article 9 (9VAC5-140-6410 et seq.) of this part, after which the conditional allowance becomes an allowance to be used for compliance purposes.

"Consignment auction" or "auction" means the CO2 auction conducted on a quarterly basis by RGGI, Inc., in which CO2 budget sources and DMME are allocated a share of allowances by the department that CO2 budget sources and the holder of a public contract with DMME consign into the auction, and auction revenue is returned to CO2 budget sources and the holder of a public contract with DMME in accordance with procedures established by the department.

"Continuous Emissions Monitoring System" or "CEMS" means the equipment required under Article 8 (9VAC5-140-6330 et seq.) of this part to sample, analyze, measure, and provide, by means of readings recorded at least once every 15 minutes (using an automated DAHS), a permanent record of stack gas volumetric flow rate, stack gas moisture content, and oxygen or carbon dioxide concentration (as applicable), in a manner consistent with 40 CFR Part 75 and Article 8 (9VAC5-140-6330 et seq.) of this part. The following systems are types of CEMS required under Article 8 (9VAC5-140-6330 et seq.) of this part:

a. A flow monitoring system, consisting of a stack flow rate monitor and an automated DAHS and providing a permanent, continuous record of stack gas volumetric flow rate, in standard cubic feet per hour (scf);

b. A NOX emissions rate (or NOX-diluent) monitoring system, consisting of a NOX pollutant concentration monitor, a diluent gas (CO2 or O2) monitor, and an automated DAHS and providing a permanent, continuous record of NOX concentration, in parts per million (ppm), diluent gas concentration, in percent CO2 or O2,and NOX emissions rate, in pounds per million British thermal units (lb/MMBtu);

c. A moisture monitoring system, as defined in 40 CFR 75.11(b)(2) and providing a permanent, continuous record of the stack gas moisture content, in percent H2O;

d. A CO2 monitoring system, consisting of a CO2 pollutant concentration monitor (or an O2 monitor plus suitable mathematical equations from which the CO2 concentration is derived) and an automated DAHS and providing a permanent, continuous record of CO2 emissions, in percent CO2; and

e. An O2 monitoring system, consisting of an O2 concentration monitor and an automated DAHS and providing a permanent, continuous record of O2, in percent O2.

"Control period" means a three-calendar-year time period. The first control period is from January 1, 2021, to December 31, 2023, inclusive. Each subsequent compliance control period shall be a sequential three-calendar-year period. The first two compliance years of each control period are each defined as an interim control period, beginning on January 1, 2022.

"Cross State Air Pollution Rule (CSAPR) NOX Annual Trading Program" means a multistate NOX air pollution control and emission reduction program established in accordance with Subpart AAAAA of 40 CFR Part 97 and 40 CFR 52.38(a), including such a program that is revised in a SIP revision approved by the administrator under 40 CFR 52.38(a)(3) or (4) or that is established in a SIP revision approved by the administrator under 40 CFR 52.38(a)(5), as a means of mitigating interstate transport of fine particulates and NOX.

"Cross State Air Pollution Rule (CSAPR) NOX Ozone Season Trading Program" means a multistate NOX air pollution control and emission reduction program established in accordance with Subpart BBBBB of 40 CFR Part 97 and 40 CFR 52.38(b), including such a program that is revised in a SIP revision approved by the administrator under 40 CFR 52.38(b)(3) or (4) or that is established in a SIP revision approved by the administrator under 40 CFR 52.38(b)(5), as a means of mitigating interstate transport of ozone and NOX.

"Cross State Air Pollution Rule (CSAPR) SO2 Group 1 Trading Program" means a multistate SO2 air pollution control and emission reduction program established in accordance with Subpart CCCCC of 40 CFR Part 97 and 40 CFR 52.39(a), (b), (d) through (f), (j), and (k), including such a program that is revised in a SIP revision approved by the administrator under 40 CFR 52.39(d) or (e) or that is established in a SIP revision approved by the administrator under 40 CFR 52.39(f), as a means of mitigating interstate transport of fine particulates and SO2.

"Cross State Air Pollution Rule (CSAPR) SO2 Group 2 Trading Program" means a multistate SO2 air pollution control and emission reduction program established in accordance with Subpart DDDDD of 40 CFR Part 97 and 40 CFR 52.39(a), (c), and (g) through (k), including such a program that is revised in a SIP revision approved by the administrator under 40 CFR 52.39(g) or (h) or that is established in a SIP revision approved by the administrator under 40 CFR 52.39(i), as a means of mitigating interstate transport of fine particulates and SO2.

"Department" means the Virginia Department of Environmental Quality.

"DMME" means the Virginia Department of Mines, Minerals and Energy.

"Excess emissions" means any tonnage of CO2 emitted by a CO2 budget source during a control period that exceeds the CO2 budget emissions limitation for the source.

"Excess interim emissions" means any tonnage of CO2 emitted by a CO2 budget source during an interim control period multiplied by 0.50 that exceeds the CO2 budget emissions limitation for the source.

"Fossil fuel" means natural gas, petroleum, coal, or any form of solid, liquid, or gaseous fuel derived from such material.

"Fossil fuel-fired" means the combustion of fossil fuel, alone or in combination with any other fuel, where the fossil fuel combusted comprises, or is projected to comprise, more than 10% of the annual heat input on a Btu basis during any year.

"General account" means a COATS account, established under Article 6 (9VAC5-140-6220 et seq.) of this part that is not a compliance account.

"Gross generation" means the electrical output in MWe at the terminals of the generator.

"Initial control period" means the period beginning January 1, 2020, and ending December 31, 2020.

"Interim control period" means a one-calendar-year time period, during each of the first and second calendar years of each three-year control period. The first interim control period starts January 1, 2021, and ends December 31, 2021, inclusive. The second interim control period starts January 1, 2022, and ends December 31, 2022, inclusive. Each successive three-year control period will have two interim control periods, comprised of each of the first two calendar years of that control period.

"Life-of-the-unit contractual arrangement" means a unit participation power sales agreement under which a customer reserves, or is entitled to receive, a specified amount or percentage of nameplate capacity or associated energy from any specified unit pursuant to a contract:

a. For the life of the unit;

b. For a cumulative term of no less than 30 years, including contracts that permit an election for early termination; or

c. For a period equal to or greater than 25 years or 70% of the economic useful life of the unit determined as of the time the unit is built, with option rights to purchase or release some portion of the nameplate capacity and associated energy generated by the unit at the end of the period.

"Maximum design heat input" means the ability of a unit to combust a stated maximum amount of fuel per hour on a steady state basis, as determined by the physical design and physical characteristics of the unit.

"Maximum potential hourly heat input" means an hourly heat input used for reporting purposes when a unit lacks certified monitors to report heat input. If the unit intends to use Appendix D of 40 CFR Part 75 to report heat input, this value shall be calculated, in accordance with 40 CFR Part 75, using the maximum fuel flow rate and the maximum gross calorific value. If the unit intends to use a flow monitor and a diluent gas monitor, this value shall be reported, in accordance with 40 CFR Part 75, using the maximum potential flow rate and either the maximum CO2 concentration in percent CO2 or the minimum O2 concentration in percent O2.

"Minimum reserve price" means, in calendar year 2020, $2.00. Each calendar year thereafter, the minimum reserve price shall be 1.025 multiplied by the minimum reserve price from the previous calendar year, rounded to the nearest whole cent.

"Monitoring system" means any monitoring system that meets the requirements of Article 8 (9VAC5-140-6330 et seq.) of this part, including a CEMS, an excepted monitoring system, or an alternative monitoring system.

"Nameplate capacity" means the maximum electrical output in MWe that a generator can sustain over a specified period of time when not restricted by seasonal or other deratings as measured in accordance with the U.S. Department of Energy standards.

"Net-electric output" means the amount of gross generation in MWh the generators produce, including output from steam turbines, combustion turbines, and gas expanders, as measured at the generator terminals, less the electricity used to operate the plant (i.e., auxiliary loads); such uses include fuel handling equipment, pumps, fans, pollution control equipment, other electricity needs, and transformer losses as measured at the transmission side of the step up transformer (e.g., the point of sale).

"Non-CO2 budget unit" means a unit that does not meet the applicability criteria of 9VAC5-140-6040.

"Operator" means any person who operates, controls, or supervises a CO2 budget unit or a CO2 budget source and shall include any holding company, utility system, or plant manager of such a unit or source.

"Owner" means any of the following persons:

a. Any holder of any portion of the legal or equitable title in a CO2 budget unit;

b. Any holder of a leasehold interest in a CO2 budget unit, other than a passive lessor, or a person who has an equitable interest through such lessor, whose rental payments are not based, either directly or indirectly, upon the revenues or income from the CO2 budget unit;

c. Any purchaser of power from a CO2 budget unit under a life-of-the-unit contractual arrangement in which the purchaser controls the dispatch of the unit; or

d. With respect to any general account, any person who has an ownership interest with respect to the CO2 allowances held in the general account and who is subject to the binding agreement for the CO2 authorized account representative to represent that person's ownership interest with respect to the CO2 allowances.

"Participating state" means a state that has established a corresponding regulation as part of the CO2 Budget Trading Program.

"Receive" or "receipt of" means, with regard to CO2 allowances, the movement of CO2 allowances by the department or its agent from one COATS account to another, for purposes of allocation, transfer, or deduction.

"Recordation," "record," or "recorded" means, with regard to CO2 allowances, the movement of CO2 allowances by the department or its agent from one COATS account to another, for purposes of allocation, transfer, or deduction.

"RGGI, Inc." means the 501(c)(3) nonprofit corporation created to support development and implementation of the Regional Greenhouse Gas Initiative (RGGI). Participating RGGI states use RGGI, Inc., as their agent to conduct the consignment auction and to operate and manage COATS.

"Reserve price" means the minimum acceptable price for each CO2 allowance in a specific auction. The reserve price at an auction is either the minimum reserve price or the CCR trigger price, as specified in Article 9 (9VAC5-140-6410 et seq.) of this part.

"Serial number" means, when referring to CO2 allowances, the unique identification number assigned to each CO2 allowance by the department or its agent under 9VAC5-140 6250 C.

"Source" means any governmental, institutional, commercial, or industrial structure, installation, plant, building, or facility that emits or has the potential to emit any air pollutant. A source, including a source with multiple units, shall be considered a single facility.

"State" means the Commonwealth of Virginia. The term "state" shall have its conventional meaning where such meaning is clear from the context.

"Submit" or "serve" means to send or transmit a document, information, or correspondence to the person specified in accordance with the applicable regulation:

a. In person;

b. By U.S. Postal Service; or

c. By other means of dispatch or transmission and delivery.

Compliance with any "submission," "service," or "mailing" deadline shall be determined by the date of dispatch, transmission, or mailing and not the date of receipt.

"Ton" or "tonnage" means any short ton, or 2,000 pounds. For the purpose of determining compliance with the CO2 requirements of 9VAC5-140-6050 C, total tons for a control period shall be calculated as the sum of all recorded hourly emissions, or the tonnage equivalent of the recorded hourly emissions rates, in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part, with any remaining fraction of a ton equal to or greater than 0.50 ton deemed to equal one ton and any fraction of a ton less than 0.50 ton deemed to equal zero tons. A short ton is equal to 0.9072 metric tons.

"Undistributed CO2 allowances" means CO2 allowances originally allocated to a set aside account as pursuant to 9VAC5-140-6210 that were not distributed.

"Unit operating day" means a calendar day in which a unit combusts any fuel.

"Unsold CO2 allowances" means CO2 allowances that have been made available for sale in an auction conducted by the department or its agent, but not sold.

"Virginia CO2 Budget Trading Program adjusted budget" means an adjusted budget determined in accordance with 9VAC5-140-6210 and is the annual amount of CO2 tons available in Virginia for allocation in a given allocation year, in accordance with the CO2 Budget Trading Program. CO2 CCR allowances offered for sale at an auction are separate from and additional to CO2 allowances allocated from the Virginia CO2 Budget Trading Program adjusted budget.

"Virginia CO2 Budget Trading Program base budget" means the budget specified in 9VAC5-140-6190. CO2 CCR allowances offered for sale at an auction are separate from and additional to CO2 allowances allocated from the Virginia CO2 Budget Trading Program base budget.

9VAC5-140-6030. Measurements, abbreviations, and acronyms.

Measurements, abbreviations, and acronyms used in this part are defined as follows:

Btu - British thermal unit.

CAA - federal Clean Air Act.

CCR - cost containment reserve.

CEMS - Continuous Emissions Monitoring System.

COATS - CO2 Allowance Tracking System.

CO2 - carbon dioxide.

DAHS - Data Acquisition and Handling System.

EEM - efficiency measure.

H2O - water.

lb - pound.

LME - low mass emissions.

MMBtu - million British thermal units.

MW - megawatt.

MWe - megawatt electrical.

MWh - megawatt hour.

NOX - nitrogen oxides.

O2 - oxygen.

ORIS - Office of Regulatory Information Systems.

QA/QC - quality assurance/quality control.

ppm - parts per million.

scf - standard cubic feet per hour.

SO2 - sulfur dioxide.

9VAC5-140-6040. Applicability.

A. Any fossil fuel-fired unit that serves an electricity generator with a nameplate capacity equal to or greater than 25 MWe shall be a CO2 budget unit, and any source that includes one or more such units shall be a CO2 budget source, subject to the requirements of this part.

B. Exempt from the requirements of this part is any fossil fuel power generating unit owned by an individual facility and located at that individual facility that generates electricity and heat from fossil fuel for the primary use of operation of the facility.

9VAC5-140-6050. Standard requirements.

A. Permit requirements shall be as follows.

1. The CO2 authorized account representative of each CO2 budget source required to have an operating permit pursuant to 9VAC5-85 (Permits for Stationary Sources of Pollutants Subject to Regulation) and each CO2 budget unit required to have an operating permit pursuant to 9VAC5-85 shall:

a. Submit to the department a complete CO2 budget permit application under 9VAC5-140-6160 in accordance with the deadlines specified in 9VAC5-140-6150; and

b. Submit in a timely manner any supplemental information that the department determines is necessary in order to review the CO2 budget permit application and issue or deny a CO2 budget permit.

2. The owners and operators of each CO2 budget source required to have an operating permit pursuant to 9VAC5-85 (Permits for Stationary Sources of Pollutants Subject to Regulation) and each CO2 budget unit required to have an operating permit pursuant to 9VAC5-85 for the source shall have a CO2 budget permit and operate the CO2 budget source and the CO2 budget unit at the source in compliance with such CO2 budget permit.

B. Monitoring requirements shall be as follows.

1. The owners and operators and, to the extent applicable, the CO2 authorized account representative of each CO2 budget source and each CO2 budget unit at the source shall comply with the monitoring requirements of Article 8 (9VAC5-140-6330 et seq.) of this part.

2. The emissions measurements recorded and reported in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part shall be used to determine compliance by the unit with the CO2 requirements under subsection C of this section.

C. CO2 requirements shall be as follows.

1. The owners and operators of each CO2 budget source and each CO2 budget unit at the source shall hold CO2 allowances available for compliance deductions under 9VAC5-140-6260, as of the CO2 allowance transfer deadline, in the source's compliance account in an amount not less than the total CO2 emissions for the control period from all CO2 budget units at the source, less the CO2 allowances deducted to meet the requirements of subdivision 2 of this subsection, with respect to the previous two interim control periods as determined in accordance with Article 6 (9VAC5-140-6220 et seq.) and Article 8 (9VAC5-140-6330 et seq.) of this part.

2. The owners and operators of each CO2 budget source and each CO2 budget unit at the source shall hold CO2 allowances available for compliance deductions under 9VAC5-140-6260, as of the CO2 allowance transfer deadline, in the source's compliance account in an amount not less than the total CO2 emissions for the interim control period from all CO2 budget units at the source multiplied by 0.50, as determined in accordance with Article 6 (9VAC5-140-6220 et seq.) and Article 8 (9VAC5-140-6330 et seq.) of this part.

3. Each ton of CO2 emitted in excess of the CO2 budget emissions limitation for a control period shall constitute a separate violation of this part and applicable state law.

4. Each ton of excess interim emissions shall constitute a separate violation of this part and applicable state law.

5. A CO2 budget unit shall be subject to the requirements under subdivision 1 of this subsection starting on the later of January 1, 2020, or the date on which the unit commences operation.

7. A CO2 allowance shall not be deducted, to comply with the requirements under subdivision 1 or 2 of this subsection, for a control period that ends prior to the year for which the CO2 allowance was allocated.

8. A CO2 allowance under the CO2 Budget Trading Program is a limited authorization by the department to emit one ton of CO2 in accordance with the CO2 Budget Trading Program. No provision of the CO2 Budget Trading Program, the CO2 budget permit application, or the CO2 budget permit or any provision of law shall be construed to limit the authority of the department or a participating state to terminate or limit such authorization.

9. A CO2 allowance under the CO2 Budget Trading Program does not constitute a property right.

D. The owners and operators of a CO2 budget source that has excess emissions in any control period shall:

1. Forfeit the CO2 allowances required for deduction under 9VAC5-140-6260 D 1; and

2. Pay any fine, penalty, or assessment or comply with any other remedy imposed under 9VAC5-140-6260 D 2.

E. Recordkeeping and reporting requirements shall be as follows:

1. Unless otherwise provided, the owners and operators of the CO2 budget source and each CO2 budget unit at the source shall keep on site at the source each of the following documents for a period of 10 years from the date the document is created. This period may be extended for cause, at any time prior to the end of 10 years, in writing by the department.

a. The account certificate of representation for the CO2 authorized account representative for the source and each CO2 budget unit at the source and all documents that demonstrate the truth of the statements in the account certificate of representation, in accordance with 9VAC5-140-6110, provided that the certificate and documents shall be retained on site at the source beyond such 10-year period until such documents are superseded because of the submission of a new account certificate of representation changing the CO2 authorized account representative.

b. All emissions monitoring information, in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part and 40 CFR 75.57.

c. Copies of all reports, compliance certifications, and other submissions and all records made or required under the CO2 Budget Trading Program.

d. Copies of all documents used to complete a CO2 budget permit application and any other submission under the CO2 Budget Trading Program or to demonstrate compliance with the requirements of the CO2 Budget Trading Program.

2. The CO2 authorized account representative of a CO2 budget source and each CO2 budget unit at the source shall submit the reports and compliance certifications required under the CO2 Budget Trading Program, including those under Article 4 (9VAC5-140-6170 et seq.) of this part.

F. Liability requirements shall be as follows.

1. No permit revision shall excuse any violation of the requirements of the CO2 Budget Trading Program that occurs prior to the date that the revision takes effect.

2. Any provision of the CO2 Budget Trading Program that applies to a CO2 budget source, including a provision applicable to the CO2 authorized account representative of a CO2 budget source, shall also apply to the owners and operators of such source and of the CO2 budget units at the source.

3. Any provision of the CO2 Budget Trading Program that applies to a CO2 budget unit, including a provision applicable to the CO2 authorized account representative of a CO2 budget unit, shall also apply to the owners and operators of such unit.

G. No provision of the CO2 Budget Trading Program, a CO2 budget permit application, or a CO2 budget permit shall be construed as exempting or excluding the owners and operators and, to the extent applicable, the CO2 authorized account representative of the CO2 budget source or CO2 budget unit from compliance with any other provisions of applicable state and federal law or regulations.

9VAC5-140-6060. Computation of time.

A. Unless otherwise stated, any time period scheduled, under the CO2 Budget Trading Program, to begin on the occurrence of an act or event shall begin on the day the act or event occurs.

B. Unless otherwise stated, any time period scheduled, under the CO2 Budget Trading Program, to begin before the occurrence of an act or event shall be computed so that the period ends the day before the act or event occurs.

C. Unless otherwise stated, if the final day of any time period, under the CO2 Budget Trading Program, falls on a weekend or a state or federal holiday, the time period shall be extended to the next business day.

9VAC5-140-6070. Severability.

If any provision of this part, or its application to any particular person or circumstances, is held invalid, the remainder of this part, and the application thereof to other persons or circumstances, shall not be affected thereby.

9VAC5-140-6080. Authorization and responsibilities of the CO2 authorized account representative.

A. Except as provided under 9VAC5-140-6090, each CO2 budget source, including all CO2 budget units at the source, shall have one and only one CO2 authorized account representative, with regard to all matters under the CO2 Budget Trading Program concerning the source or any CO2 budget unit at the source.

B. The CO2 authorized account representative of the CO2 budget source shall be selected by an agreement binding on the owners and operators of the source and all CO2 budget units at the source and must act in accordance with the certificate of representation under 9VAC5-140-6110.

C. Upon receipt by the department or its agent of a complete account certificate of representation under 9VAC5-140-6110, the CO2 authorized account representative of the source shall represent and, by his representations, actions, inactions, or submissions, legally bind each owner and operator of the CO2 budget source represented and each CO2 budget unit at the source in all matters pertaining to the CO2 Budget Trading Program, notwithstanding any agreement between the CO2 authorized account representative and such owners and operators. The owners and operators shall be bound by any decision or order issued to the CO2 authorized account representative by the department or a court regarding the source or unit.

D. No CO2 budget permit shall be issued, and no COATS account shall be established for a CO2 budget source, until the department or its agent has received a complete account certificate of representation under 9VAC5-140-6110 for a CO2 authorized account representative of the source and the CO2 budget units at the source.

E. Each submission under the CO2 Budget Trading Program shall be submitted, signed, and certified by the CO2 authorized account representative for each CO2 budget source on behalf of which the submission is made. Each such submission shall include the following certification statement by the CO2 authorized account representative: "I am authorized to make this submission on behalf of the owners and operators of the CO2 budget sources or CO2 budget units for which the submission is made. I certify under penalty of law that I have personally examined, and am familiar with, the statements and information submitted in this document and all its attachments. Based on my inquiry of those individuals with primary responsibility for obtaining the information, I certify that the statements and information are to the best of my knowledge and belief true, accurate, and complete. I am aware that there are significant penalties for submitting false statements and information or omitting required statements and information, including the possibility of fine or imprisonment."

F. The department or its agent will accept or act on a submission made on behalf of owners or operators of a CO2 budget source or a CO2 budget unit only if the submission has been made, signed, and certified in accordance with subsection E of this section.

9VAC5-140-6090. Alternate CO2 authorized account representative.

A. An account certificate of representation may designate one and only one alternate CO2 authorized account representative who may act on behalf of the CO2 authorized account representative. The agreement by which the alternate CO2 authorized account representative is selected shall include a procedure for authorizing the alternate CO2 authorized account representative to act in lieu of the CO2 authorized account representative.

B. Upon receipt by the department or its agent of a complete account certificate of representation under 9VAC5-140-6110, any representation, action, inaction, or submission by the alternate CO2 authorized account representative shall be deemed to be a representation, action, inaction, or submission by the CO2 authorized account representative.

9VAC5-140-6100. Changing the CO2 authorized account representatives and the alternate CO2 authorized account representative; changes in the owners and operators.

A. The CO2 authorized account representative may be changed at any time upon receipt by the department or its agent of a superseding complete account certificate of representation under 9VAC5-140-6110. Notwithstanding any such change, all representations, actions, inactions, and submissions by the previous CO2 authorized account representative or alternate CO2 authorized account representative prior to the time and date when the department or its agent receives the superseding account certificate of representation shall be binding on the new CO2 authorized account representative and the owners and operators of the CO2 budget source and the CO2 budget units at the source.

B. The alternate CO2 authorized account representative may be changed at any time upon receipt by the department or its agent of a superseding complete account certificate of representation under 9VAC5-140-6110. Notwithstanding any such change, all representations, actions, inactions, and submissions by the previous or alternate CO2 authorized account representative or alternate CO2 authorized account representative prior to the time and date when the department or its agent receives the superseding account certificate of representation shall be binding on the new alternate CO2 authorized account representative and the owners and operators of the CO2 budget source and the CO2 budget units at the source.

C. Changes in the owners and operators shall be addressed as follows.

1. In the event a new owner or operator of a CO2 budget source or a CO2 budget unit is not included in the list of owners and operators submitted in the account certificate of representation, such new owner or operator shall be deemed to be subject to and bound by the account certificate of representation, the representations, actions, inactions, and submissions of the CO2 authorized account representative and any alternate CO2 authorized account representative of the source or unit, and the decisions, orders, actions, and inactions of the department, as if the new owner or operator were included in such list.

2. Within 30 days following any change in the owners and operators of a CO2 budget source or a CO2 budget unit, including the addition of a new owner or operator, the CO2 authorized account representative or alternate CO2 authorized account representative shall submit a revision to the account certificate of representation amending the list of owners and operators to include the change.

9VAC5-140-6110. Account certificate of representation.

A. A complete account certificate of representation for a CO2 authorized account representative or an alternate CO2 authorized account representative shall include the following elements in a format prescribed by the department or its agent:

1. Identification of the CO2 budget source and each CO2 budget unit at the source for which the account certificate of representation is submitted;

3. A list of the owners and operators of the CO2 budget source and of each CO2 budget unit at the source;

4. The following certification statement by the CO2 authorized account representative and any alternate CO2 authorized account representative: "I certify that I was selected as the CO2 authorized account representative or alternate CO2 authorized account representative, as applicable, by an agreement binding on the owners and operators of the CO2 budget source and each CO2 budget unit at the source. I certify that I have all the necessary authority to carry out my duties and responsibilities under the CO2 Budget Trading Program on behalf of the owners and operators of the CO2 budget source and of each CO2 budget unit at the source and that each such owner and operator shall be fully bound by my representations, actions, inactions, or submissions and by any decision or order issued to me by the department or a court regarding the source or unit."; and

5. The signature of the CO2 authorized account representative and any alternate CO2 authorized account representative and the dates signed.

B. Unless otherwise required by the department or its agent, documents of agreement referred to in the account certificate of representation shall not be submitted to the department or its agent. Neither the department nor its agent shall be under any obligation to review or evaluate the sufficiency of such documents, if submitted.

A. Once a complete account certificate of representation under 9VAC5-140-6110 has been submitted and received, the department and its agent will rely on the account certificate of representation unless and until the department or its agent receives a superseding complete account certificate of representation under 9VAC5-140-6110.

B. Except as provided in 9VAC5-140-6100 A or B, no objection or other communication submitted to the department or its agent concerning the authorization, or any representation, action, inaction, or submission of the CO2 authorized account representative shall affect any representation, action, inaction, or submission of the CO2 authorized account representative or the finality of any decision or order by the department or its agent under the CO2 Budget Trading Program.

C. Neither the department nor its agent will adjudicate any private legal dispute concerning the authorization or any representation, action, inaction, or submission of any CO2 authorized account representative, including private legal disputes concerning the proceeds of CO2 allowance transfers.

A. A CO2 authorized account representative may delegate, to one or more natural persons, his authority to make an electronic submission to the department or its agent under this part.

B. An alternate CO2 authorized account representative may delegate, to one or more natural persons, his authority to make an electronic submission to the department or its agent under this part.

C. To delegate authority to make an electronic submission to the department or its agent in accordance with subsections A and B of this section, the CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, shall submit to the department or its agent a notice of delegation, in a format prescribed by the department that includes the following elements:

2. The name, address, email address, telephone number, and facsimile transmission number of each such natural person, referred to as the "electronic submission agent";

3. For each such natural person, a list of the type of electronic submissions under subsection A or B of this section for which authority is delegated to him; and

4. The following certification statement by such CO2 authorized account representative or alternate CO2 authorized account representative: "I agree that any electronic submission to the department or its agent that is by a natural person identified in this notice of delegation and of a type listed for such electronic submission agent in this notice of delegation and that is made when I am a CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 9VAC5-140-6130 D shall be deemed to be an electronic submission by me. Until this notice of delegation is superseded by another notice of delegation under 9VAC5-140-6130 D, I agree to maintain an email account and to notify the department or its agent immediately of any change in my email address unless all delegation authority by me under 9VAC5-140-6130 is terminated."

D. A notice of delegation submitted under subsection C of this section shall be effective, with regard to the CO2 authorized account representative or alternate CO2 authorized account representative identified in such notice, upon receipt of such notice by the department or its agent and until receipt by the department or its agent of a superseding notice of delegation by such CO2 authorized account representative or alternate CO2 authorized account representative as appropriate. The superseding notice of delegation may replace any previously identified electronic submission agent, add a new electronic submission agent, or eliminate entirely any delegation of authority.

E. Any electronic submission covered by the certification in subdivision C 4 of this section and made in accordance with a notice of delegation effective under subsection D of this section shall be deemed to be an electronic submission by the CO2 authorized account representative or alternate CO2 authorized account representative submitting such notice of delegation.

F. A CO2 authorized account representative may delegate, to one or more natural persons, his authority to review information in the CO2 allowance tracking system under this part.

G. An alternate CO2 authorized account representative may delegate, to one or more natural persons, his authority to review information in the CO2 allowance tracking system under this part.

H. To delegate authority to review information in the CO2 allowance tracking system in accordance with subsections F and G of this section, the CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, must submit to the department or its agent a notice of delegation, in a format prescribed by the department that includes the following elements:

2. The name, address, email address, telephone number, and facsimile transmission number of each such natural person, referred to as the "reviewer";

3. For each such natural person, a list of the type of information under subsection F or G of this section for which authority is delegated to him; and

4. The following certification statement by such CO2 authorized account representative or alternate CO2 authorized account representative: "I agree that any information that is reviewed by a natural person identified in this notice of delegation and of a type listed for such information accessible by the reviewer in this notice of delegation and that is made when I am a CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under subsection I of this section shall be deemed to be a reviewer by me. Until this notice of delegation is superseded by another notice of delegation under subsection I of this section, I agree to maintain an email account and to notify the department or its agent immediately of any change in my email address unless all delegation authority by me under this section is terminated."

I. A notice of delegation submitted under subsection H of this section shall be effective, with regard to the CO2 authorized account representative or alternate CO2 authorized account representative identified in such notice, upon receipt of such notice by the department or its agent and until receipt by the department or its agent of a superseding notice of delegation by such CO2 authorized account representative or alternate CO2 authorized account representative as appropriate. The superseding notice of delegation may replace any previously identified reviewer, add a new reviewer, or eliminate entirely any delegation of authority.

Article 3 Permits

9VAC5-140-6140. CO2 budget permit requirements.

A. Each CO2 budget source shall have a permit issued by the department pursuant to 9VAC5-85 (Permits for Stationary Sources of Pollutants Subject to Regulation).

B. Each CO2 budget permit shall contain all applicable CO2 Budget Trading Program requirements and shall be a complete and distinguishable portion of the permit under subsection A of this section.

9VAC5-140-6150. Submission of CO2 budget permit applications.

For any CO2 budget source, the CO2 authorized account representative shall submit a complete CO2 budget permit application under 9VAC5-140-6160 covering such CO2 budget source to the department by the later of January 1, 2020, or 12 months before the date on which the CO2 budget source, or a new unit at the source, commences operation.

A complete CO2 budget permit application shall include the following elements concerning the CO2 budget source for which the application is submitted, in a format prescribed by the department:

1. Identification of the CO2 budget source, including plant name and the ORIS (Office of Regulatory Information Systems) or facility code assigned to the source by the Energy Information Administration of the U.S. Department of Energy if applicable;

2. Identification of each CO2 budget unit at the CO2 budget source; and

A. For each control period in which a CO2 budget source is subject to the CO2 requirements of 9VAC5-140-6050 C, the CO2 authorized account representative of the source shall submit to the department by March 1 following the relevant control period, a compliance certification report. A compliance certification report is not required as part of the compliance obligation during an interim control period.

B. The CO2 authorized account representative shall include in the compliance certification report under subsection A of this section the following elements, in a format prescribed by the department:

1. Identification of the source and each CO2 budget unit at the source;

2. At the CO2 authorized account representative's option, the serial numbers of the CO2 allowances that are to be deducted from the source's compliance account under 9VAC5-140-6260 for the control period; and

3. The compliance certification under subsection C of this section.

C. In the compliance certification report under subsection A of this section, the CO2 authorized account representative shall certify, based on reasonable inquiry of those persons with primary responsibility for operating the source and the CO2 budget units at the source in compliance with the CO2 Budget Trading Program, whether the source and each CO2 budget unit at the source for which the compliance certification is submitted was operated during the calendar years covered by the report in compliance with the requirements of the CO2 Budget Trading Program, including:

1. Whether the source was operated in compliance with the CO2 requirements of 9VAC5-140-6050 C;

2. Whether the monitoring plan applicable to each unit at the source has been maintained to reflect the actual operation and monitoring of the unit, and contains all information necessary to attribute CO2 emissions to the unit, in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part;

3. Whether all the CO2 emissions from the units at the source were monitored or accounted for through the missing data procedures and reported in the quarterly monitoring reports, including whether conditional data were reported in the quarterly reports in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part. If conditional data were reported, the owner or operator shall indicate whether the status of all conditional data has been resolved and all necessary quarterly report resubmissions have been made;

4. Whether the facts that form the basis for certification under Article 8 (9VAC5-140-6330 et seq.) of this part of each monitor at each unit at the source, or for using an excepted monitoring method or alternative monitoring method approved under Article 8 (9VAC5-140-6330 et seq.) of this part, if any, have changed; and

5. If a change is required to be reported under subdivision 4 of this subsection, specify the nature of the change, the reason for the change, when the change occurred, and how the unit's compliance status was determined subsequent to the change, including what method was used to determine emissions when a change mandated the need for monitor recertification.

9VAC5-140-6180. Action on compliance certifications.

A. The department or its agent may review and conduct independent audits concerning any compliance certification or any other submission under the CO2 Budget Trading Program and make appropriate adjustments of the information in the compliance certifications or other submissions.

B. The department or its agent may deduct CO2 allowances from or transfer CO2 allowances to a source's compliance account based on the information in the compliance certifications or other submissions, as adjusted under subsection A of this section.

Article 5 CO2 Allowance Allocations

Editor's Note: Two versions of 9VAC5-140-6190 are provided for comment. The board seeks comment on whether the base budget should be 33 million tons or 34 million tons, with corresponding 3.0% per year reductions. The first version (Version 1) represents a 33 million ton base budget, and the second version (Version 2) represents a 34 million ton base budget.

9VAC5-140-6190. Base budgets.

Version 1, 33 million ton base budget:

A. The Virginia CO2 Budget Trading Program base budget shall be as follows:

1. For 2020, the Virginia CO2 Budget Trading Program base budget is 33 million tons.

2. For 2021, the Virginia CO2 Budget Trading Program base budget is 32.01 million tons.

3. For 2022, the Virginia CO2 Budget Trading Program base budget is 31.02 million tons.

4. For 2023, the Virginia CO2 Budget Trading Program base budget is 30.03 million tons.

5. For 2024, the Virginia CO2 Budget Trading Program base budget is 29.04 million tons.

6. For 2025, the Virginia CO2 Budget Trading Program base budget is 28.05 million tons.

7. For 2026, the Virginia CO2 Budget Trading Program base budget is 27.06 million tons.

8. For 2027, the Virginia CO2 Budget Trading Program base budget is 26.07 million tons.

9. For 2028, the Virginia CO2 Budget Trading Program base budget is 25.08 million tons.

10. For 2029, the Virginia CO2 Budget Trading Program base budget is 24.09 million tons.

11. For 2030, the Virginia CO2 Budget Trading Program base budget is 23.10 million tons.

B. The department will allocate conditional allowances to CO2 budget units and to DMME. After a conditional allowance has been consigned in an auction by a CO2 budget unit and the holder of a public contract with DMME as specified under Article 9 (9VAC5-140-6410 et seq.) of this part, the conditional allowance becomes an allowance to be used for compliance purposes.

C. For 2031 and each succeeding calendar year, the Virginia CO2 Budget Trading Program base budget is 23.10 million tons.

Version 2, 34 million ton base budget:

A. The Virginia CO2 Budget Trading Program base budget shall be as follows:

1. For 2020, the Virginia CO2 Budget Trading Program base budget is 34 million tons.

2. For 2021, the Virginia CO2 Budget Trading Program base budget is 32.98 million tons.

3. For 2022, the Virginia CO2 Budget Trading Program base budget is 31.96 million tons.

4. For 2023, the Virginia CO2 Budget Trading Program base budget is 30.94 million tons.

5. For 2024, the Virginia CO2 Budget Trading Program base budget is 29.92 million tons.

6. For 2025, the Virginia CO2 Budget Trading Program base budget is 28.90 million tons.

7. For 2026, the Virginia CO2 Budget Trading Program base budget is 27.88 million tons.

8. For 2027, the Virginia CO2 Budget Trading Program base budget is 26.86 million tons.

9. For 2028, the Virginia CO2 Budget Trading Program base budget is 25.84 million tons.

10. For 2029, the Virginia CO2 Budget Trading Program base budget is 24.82 million tons.

11. For 2030, the Virginia CO2 Budget Trading Program base budget is 23.80 million tons.

B. The department will allocate conditional allowances to CO2 budget units and to DMME. After a conditional allowance has been consigned in an auction by a CO2 budget unit and the holder of a public contract with DMME as specified under Article 9 (9VAC5-140-6410 et seq.) of this part, the conditional allowance becomes an allowance to be used for compliance purposes.

C. For 2031 and each succeeding calendar year, the Virginia CO2 Budget Trading Program base budget is 23.80 million tons.

9VAC5-140-6200. Undistributed and unsold CO2 allowances.

A. The department may retire undistributed CO2 allowances at the end of each control period.

B. The department may retire unsold CO2 allowances at the end of each control period.

Editor's Note: Two versions of 9VAC5-140-6210 are provided for comment. The board seeks comment on whether the base budget should be 33 million tons or 34 million tons, with corresponding 3.0% per year reductions. The first version (Version 1) represents a 33 million ton base budget, and the second version (Version 2) represents a 34 million ton base budget.

9VAC5-140-6210. CO2 allowance allocations.

Version 1, 33 million ton base budget:

A. The department will allocate 95% of the Virginia CO2 Budget Trading Program base budget to CO2 budget sources to be consigned to auction to the Virginia Consignment Auction Account.

B. The department will allocate 5.0% of the Virginia CO2 Budget Trading Program base budget to DMME to be consigned to auction by DMME to assist the department for the abatement and control of air pollution, specifically, CO2.

C. For allocation years 2020 through 2031, the Virginia CO2 Budget Trading Program adjusted budget shall be the maximum number of allowances available for allocation in a given allocation year, except for CO2 CCR allowances.

D. The cost containment reserve (CCR) allocation shall be managed as follows. The department will allocate CO2 CCR allowances, separate from and additional to the Virginia CO2 Budget Trading Program base budget set forth in 9VAC5-140-6190, to the Virginia Auction Account. The CCR allocation is for the purpose of containing the cost of CO2 allowances. The department will allocate CO2 CCR allowances as follows.

1. The department will initially allocate 3.3 million CO2 CCR allowances for calendar year 2020.

2. On or before January 1, 2021, and each year thereafter, the department will allocate current vintage year CCR allowances equal to the quantity in Table 140-5A, and withdraw the number of CO2 CCR allowances that remain in the Virginia Auction Account at the end of the prior calendar year.

Table 140-5A CCR Allowances from 2021 Forward

2021

3.201

2022

3.102

2023

3.003

2024

2.904

2025

2.805

2026

2.706

2027

2.607

2028

2.508

2029

2.409

2030 and each year thereafter

2.310

E. Annual base budgets as described in subsections A and B of this section may be decreased in any year as necessary to account for transfers to the Virginia Emission Containment Reserve (ECR) account and adjustments for banked allowances. The department will convert and transfer any CO2 allowances that have been withheld from any auction in the prior year into the Virginia ECR account. The ECR withholding is for the purpose of additional emission reduction in the event of lower than anticipated emission reduction costs. The department will withhold CO2 ECR allowances as follows:

1. If the condition in 9VAC5-140-6420 D 1 is met at an auction, then the maximum number of CO2 ECR allowances that will be withheld from that auction will be equal to the quantity shown in Table 140-5B minus the total quantity of CO2 ECR allowances that have been withheld from any prior auction in that calendar year. Any CO2 ECR allowances withheld from an auction will be transferred into the Virginia ECR account.

Table 140-5B ECR Allowances from 2021 Forward

2021

3.201

2022

3.102

2023

3.003

2024

2.904

2025

2.805

2026

2.706

2027

2.607

2028

2.508

2029

2.409

2030 and each year thereafter

2.310

2. Allowances that have been transferred into the Virginia ECR account shall not be withdrawn.

F. The adjustment for banked allowances shall be as follows. On March 15, 2021, the department will determine the third adjustment for banked allowances quantity for allocation years 2021 through 2025 through the application of the following formula:

TABA = ((TA – TAE)/5) x RS%

Where:

TABA is the adjustment for banked allowances quantity in tons.

TA, adjustment, is the total quantity of allowances of vintage years prior to 2021 held in general and compliance accounts, including compliance accounts established pursuant to the CO2 Budget Trading Program but not including accounts opened by participating states, as reflected in the CO2 Allowance Tracking System on March 15, 2021.

TAE, adjustment emissions, is the total quantity of 2018, 2019, and 2020 emissions from all CO2 budget sources in all participating states, reported pursuant to CO2 Budget Trading Program as reflected in the CO2 Allowance Tracking System on March 15, 2021.

RS% is Virginia budget divided by the regional budget.

G. CO2 Budget Trading Program adjusted budgets for 2021 through 2025 shall be determined as follows. On April 15, 2021, the department will determine the Virginia CO2 Budget Trading Program adjusted budgets for the 2021 through 2025 allocation years by the following formula:

AB = BB – TABA

Where:

AB is the Virginia CO2 Budget Trading Program adjusted budget.

BB is the Virginia CO2 Budget Trading Program base budget.

TABA is the adjustment for banked allowances quantity in tons.

H. The department or its agent will publish the CO2 trading program adjusted budgets for the 2021 through 2025 allocation years.

1. By May 1, 2019, the department will submit to RGGI, Inc., the CO2 conditional allowance allocations, in a format prescribed by RGGI, Inc., and in accordance with 9VAC5-140-6215 A and B, for the initial control period, 2020.

2. By May 1, 2020, and May 1 of every third year thereafter, the department will submit to RGGI, Inc., the CO2 allowance allocations, in a format prescribed by RGGI, Inc., for the applicable control period, and in accordance with 9VAC5-140-6215 A and B.

Version 2, 34 million ton base budget:

A. The department will allocate 95% of the Virginia CO2 Budget Trading Program base budget to CO2 budget sources to be consigned to auction to the Virginia Consignment Auction Account.

B. The department will allocate 5.0% of the Virginia CO2 Budget Trading Program base budget to DMME to be consigned to auction by the holder of a public contract with DMME to assist the department for the abatement and control of air pollution, specifically CO2.

C. For allocation years 2020 through 2031, the Virginia CO2 Budget Trading Program adjusted budget shall be the maximum number of allowances available for allocation in a given allocation year, except for CO2 CCR allowances.

D. The cost containment reserve (CCR) allocation shall be managed as follows. The department will allocate CO2 CCR allowances, separate from and additional to the Virginia CO2 Budget Trading Program base budget set forth in 9VAC5-140-6190, to the Virginia Auction Account. The CCR allocation is for the purpose of containing the cost of CO2 allowances. The department will allocate CO2 CCR allowances as follows.

1. The department will initially allocate 3.4 million CO2 CCR allowances for calendar year 2020.

2. On or before January 1, 2021, and each year thereafter, the department will allocate current vintage year CCR allowances equal to the quantity in Table 140-5A, and withdraw the number of CO2 CCR allowances that remain in the Virginia Auction Account at the end of the prior calendar year.

Table 140-5A CCR Allowances from 2021 Forward

2021

3.298

2022

3.196

2023

3.094

2024

2.992

2025

2.890

2026

2.788

2027

2.686

2028

2.584

2029

2.482

2030 and each year thereafter

2.390

E. Annual base budgets as described in subsections A and B of this section may be decreased in any year as necessary to account for transfers to the Virginia Emission Containment Reserve (ECR) account and adjustments for banked allowances. The department will convert and transfer any CO2 allowances that have been withheld from any auction in the prior year into the Virginia ECR account. The ECR withholding is for the purpose of additional emission reduction in the event of lower than anticipated emission reduction costs. The department will withhold CO2 ECR allowances as follows:

1. If the condition in 9VAC5-140-6420 D 1 is met at an auction, then the maximum number of CO2 ECR allowances that will be withheld from that auction will be equal to the quantity shown in Table 140-5B minus the total quantity of CO2 ECR allowances that have been withheld from any prior auction in that calendar year. Any CO2 ECR allowances withheld from an auction will be transferred into the Virginia ECR account.

Table 140-5B ECR Allowances from 2021 Forward

2021

3.298

2022

3.196

2023

3.094

2024

2.992

2025

2.890

2026

2.788

2027

2.686

2028

2.584

2029

2.482

2030 and each year thereafter

2.390

2. Allowances that have been transferred into the Virginia ECR account shall not be withdrawn.

F. The adjustment for banked allowances shall be as follows. On March 15, 2021, the department will determine the third adjustment for banked allowances quantity for allocation years 2021 through 2025 through the application of the following formula:

TABA = ((TA – TAE)/5) x RS%

Where:

TABA is the adjustment for banked allowances quantity in tons.

TA, adjustment, is the total quantity of allowances of vintage years prior to 2021 held in general and compliance accounts, including compliance accounts established pursuant to the CO2 Budget Trading Program but not including accounts opened by participating states, as reflected in the CO2 Allowance Tracking System on March 15, 2021.

TAE, adjustment emissions, is the total quantity of 2018, 2019, and 2020 emissions from all CO2 budget sources in all participating states, reported pursuant to CO2 Budget Trading Program as reflected in the CO2 Allowance Tracking System on March 15, 2021.

RS% is Virginia budget divided by the regional budget.

G. CO2 Budget Trading Program adjusted budgets for 2021 through 2025 shall be determined as follows. On April 15, 2021, the department will determine the Virginia CO2 Budget Trading Program adjusted budgets for the 2021 through 2025 allocation years by the following formula:

AB = BB – TABA

Where:

AB is the Virginia CO2 Budget Trading Program adjusted budget.

BB is the Virginia CO2 Budget Trading Program base budget.

TABA is the adjustment for banked allowances quantity in tons.

H. The department or its agent will publish the CO2 trading program adjusted budgets for the 2021 through 2025 allocation years.

1. By May 1, 2019, the department will submit to RGGI, Inc., the CO2 conditional allowance allocations, in a format prescribed by RGGI, Inc., and in accordance with 9VAC5-140-6215 A and B, for the initial control period, 2020.

2. By May 1, 2020, and May 1 of every third year thereafter, the department will submit to RGGI, Inc., the CO2 allowance allocations, in a format prescribed by RGGI, Inc., for the applicable control period, and in accordance with 9VAC5-140-6215 A and B.

9VAC5-140-6215. CO2 allocation methodology.

A. The net-electric output in MWh used with respect to CO2 allowance allocations under subsection B of this section for each CO2 budget unit shall be:

1. For units operating on or before January 1, 2020, the average of the three amounts of the unit's net-electric output during 2016, 2017, and 2018 to determine allocations for the initial control period.

2. For all units operating in each control period after 2020, the average of the three amounts of the unit's total net-electric output during the three most recent years for which data are available prior to the start of the control period.

B. 1. For each control period beginning in 2020 and thereafter, the department will allocate to all CO2 budget units that have a net-electric output, as determined under subsection A of this section, a total amount of CO2 conditional allowances equal to the CO2 base budget.

2. The department will allocate CO2 conditional allowances to each CO2 budget unit under subdivision 1 of this subsection in an amount determined by multiplying the total amount of CO2 allowances allocated under subdivision 1 of this subsection by the ratio of the baseline electrical output of such CO2 budget unit to the total amount of baseline electrical output of all such CO2 budget units and rounding to the nearest whole allowance as appropriate.

3. New CO2 budget units will be allocated CO2 conditional allowances once they have established electrical output data to be used in the conditional allowance allocation process.

C. For the purpose of the allocation process as described in subsections A and B of this section, CO2 budget units shall report the unit's net-electric output to the department on a yearly basis as follows:

2. By March 1, 2020, and each year thereafter, each CO2 budget unit shall report yearly net-electric output data for the previous year.

Article 6 CO2 Allowance Tracking System

9VAC5-140-6220. CO2 Allowance Tracking System accounts.

A. Consistent with 9VAC5-140-6230 A, the department or its agent will establish one compliance account for each CO2 budget source. Allocations of CO2 conditional allowances pursuant to Article 5 (9VAC5-140-6190 et seq.) of this part and deductions or transfers of CO2 conditional allowances pursuant to 9VAC5-140-6180, 9VAC5-140-6260, 9VAC5-140-6280, or Article 7 (9VAC5-140-6300 et seq.) of this part will be recorded in the compliance accounts in accordance with this section.

B. Consistent with 9VAC5-140-6230 B, the department or its agent will establish, upon request, a general account for any person. Transfers of CO2 allowances pursuant to Article 7 (9VAC5-140-6300 et seq.) of this part will be recorded in the general account in accordance with this article.

9VAC5-140-6230. Establishment of accounts.

A. Upon receipt of a complete account certificate of representation under 9VAC5-140-6110, the department or its agent will establish a conditional allowance account and a compliance account for each CO2 budget source and a conditional compliance account for DMME for which the account certificate of representation was submitted.

B. General accounts shall operate as follows.

1. Any person may apply to open a general account for the purpose of holding and transferring CO2 allowances. An application for a general account may designate one and only one CO2 authorized account representative and one and only one alternate CO2 authorized account representative who may act on behalf of the CO2 authorized account representative. The agreement by which the alternate CO2 authorized account representative is selected shall include a procedure for authorizing the alternate CO2 authorized account representative to act in lieu of the CO2 authorized account representative. A complete application for a general account shall be submitted to the department or its agent and shall include the following elements in a format prescribed by the department or its agent:

b. At the option of the CO2 authorized account representative, organization name and type of organization;

c. A list of all persons subject to a binding agreement for the CO2 authorized account representative or any alternate CO2 authorized account representative to represent their ownership interest with respect to the CO2 allowances held in the general account;

d. The following certification statement by the CO2 authorized account representative and any alternate CO2 authorized account representative: "I certify that I was selected as the CO2 authorized account representative or the CO2 alternate authorized account representative, as applicable, by an agreement that is binding on all persons who have an ownership interest with respect to CO2 allowances held in the general account. I certify that I have all the necessary authority to carry out my duties and responsibilities under the CO2 Budget Trading Program on behalf of such persons and that each such person shall be fully bound by my representations, actions, inactions, or submissions and by any order or decision issued to me by the department or its agent or a court regarding the general account.";

e. The signature of the CO2 authorized account representative and any alternate CO2 authorized account representative and the dates signed; and

f. Unless otherwise required by the department or its agent, documents of agreement referred to in the application for a general account shall not be submitted to the department or its agent. Neither the department nor its agent shall be under any obligation to review or evaluate the sufficiency of such documents, if submitted.

2. Authorization of the CO2 authorized account representative shall be as follows:

a. Upon receipt by the department or its agent of a complete application for a general account under subdivision 1 of this subsection:

(1) The department or its agent will establish a general account for the person for whom the application is submitted.

(2) The CO2 authorized account representative and any alternate CO2 authorized account representative for the general account shall represent and, by his representations, actions, inactions, or submissions, legally bind each person who has an ownership interest with respect to CO2 allowances held in the general account in all matters pertaining to the CO2 Budget Trading Program, notwithstanding any agreement between the CO2 authorized account representative or any alternate CO2 authorized account representative and such person. Any such person shall be bound by any order or decision issued to the CO2 authorized account representative or any alternate CO2 authorized account representative by the department or its agent or a court regarding the general account.

(3) Any representation, action, inaction, or submission by any alternate CO2 authorized account representative shall be deemed to be a representation, action, inaction, or submission by the CO2 authorized account representative.

b. Each submission concerning the general account shall be submitted, signed, and certified by the CO2 authorized account representative or any alternate CO2 authorized account representative for the persons having an ownership interest with respect to CO2 allowances held in the general account. Each such submission shall include the following certification statement by the CO2 authorized account representative or any alternate CO2 authorized account representative: "I am authorized to make this submission on behalf of the persons having an ownership interest with respect to the CO2 allowances held in the general account. I certify under penalty of law that I have personally examined, and am familiar with, the statements and information submitted in this document and all its attachments. Based on my inquiry of those individuals with primary responsibility for obtaining the information, I certify that the statements and information are to the best of my knowledge and belief true, accurate, and complete. I am aware that there are significant penalties for submitting false statements and information or omitting required statements and information, including the possibility of fine or imprisonment."

c. The department or its agent will accept or act on a submission concerning the general account only if the submission has been made, signed, and certified in accordance with subdivision 2 b of this subsection.

a. The CO2 authorized account representative for a general account may be changed at any time upon receipt by the department or its agent of a superseding complete application for a general account under subdivision 1 of this subsection. Notwithstanding any such change, all representations, actions, inactions, and submissions by the previous CO2 authorized account representative, or the previous alternate CO2 authorized account representative, prior to the time and date when the department or its agent receives the superseding application for a general account shall be binding on the new CO2 authorized account representative and the persons with an ownership interest with respect to the CO2 allowances in the general account.

b. The alternate CO2 authorized account representative for a general account may be changed at any time upon receipt by the department or its agent of a superseding complete application for a general account under subdivision 1 of this subsection. Notwithstanding any such change, all representations, actions, inactions, and submissions by the previous CO2 authorized account representative, or the previous alternate CO2 authorized account representative, prior to the time and date when the department or its agent receives the superseding application for a general account shall be binding on the new alternate CO2 authorized account representative and the persons with an ownership interest with respect to the CO2 allowances in the general account.

c. In the event a new person having an ownership interest with respect to CO2 allowances in the general account is not included in the list of such persons in the application for a general account, such new person shall be deemed to be subject to and bound by the application for a general account, the representations, actions, inactions, and submissions of the CO2 authorized account representative and any alternate CO2 authorized account representative, and the decisions, orders, actions, and inactions of the department or its agent, as if the new person were included in such list.

d. Within 30 days following any change in the persons having an ownership interest with respect to CO2 allowances in the general account, including the addition or deletion of persons, the CO2 authorized account representative or any alternate CO2 authorized account representative shall submit a revision to the application for a general account amending the list of persons having an ownership interest with respect to the CO2 allowances in the general account to include the change.

a. Once a complete application for a general account under subdivision 1 of this subsection has been submitted and received, the department or its agent will rely on the application unless and until a superseding complete application for a general account under subdivision 1 of this subsection is received by the department or its agent.

b. Except as provided in subdivisions 3 a and 3 b of this subsection, no objection or other communication submitted to the department or its agent concerning the authorization, or any representation, action, inaction, or submission of the CO2 authorized account representative or any alternate CO2 authorized account representative for a general account shall affect any representation, action, inaction, or submission of the CO2 authorized account representative or any alternate CO2 authorized account representative or the finality of any decision or order by the department or its agent under the CO2 Budget Trading Program.

c. Neither the department nor its agent will adjudicate any private legal dispute concerning the authorization or any representation, action, inaction, or submission of the CO2 authorized account representative or any alternate CO2 authorized account representative for a general account, including private legal disputes concerning the proceeds of CO2 allowance transfers.

a. A CO2 authorized account representative may delegate, to one or more natural persons, his authority to make an electronic submission to the department or its agent provided for under this article and Article 7 (9VAC5-140-6300 et seq.) of this part.

b. An alternate CO2 authorized account representative may delegate, to one or more natural persons, his authority to make an electronic submission to the department or its agent provided for under this article and Article 7 (9VAC5-140-6300 et seq.) of this part.

c. To delegate authority to make an electronic submission to the department or its agent in accordance with subdivisions 5 a and 5 b of this subsection, the CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, shall submit to the department or its agent a notice of delegation, in a format prescribed by the department that includes the following elements:

(2) The name, address, email address, telephone number, and facsimile transmission number of each such natural person, referred to as "electronic submission agent";

(3) For each such natural person, a list of the type of electronic submissions under subdivision 5 c (1) or 5 c (2) of this subsection for which authority is delegated to him; and

(4) The following certification statement by such CO2 authorized account representative or alternate CO2 authorized account representative: "I agree that any electronic submission to the department or its agent that is by a natural person identified in this notice of delegation and of a type listed for such electronic submission agent in this notice of delegation and that is made when I am a CO2 authorized account representative or alternate CO2 authorized account representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 9VAC5-140-6230 B 5 d shall be deemed to be an electronic submission by me. Until this notice of delegation is superseded by another notice of delegation under 9VAC5-140-6230 B 5 d, I agree to maintain an email account and to notify the department or its agent immediately of any change in my email address unless all delegation authority by me under 9VAC5-140-6230 B 5 is terminated."

d. A notice of delegation submitted under subdivision 5 c of this subsection shall be effective, with regard to the CO2 authorized account representative or alternate CO2 authorized account representative identified in such notice, upon receipt of such notice by the department or its agent and until receipt by the department or its agent of a superseding notice of delegation by such CO2 authorized account representative or alternate CO2 authorized account representative as appropriate. The superseding notice of delegation may replace any previously identified electronic submission agent, add a new electronic submission agent, or eliminate entirely any delegation of authority.

e. Any electronic submission covered by the certification in subdivision 5 c (4) of this subsection and made in accordance with a notice of delegation effective under subdivision 5 d of this subsection shall be deemed to be an electronic submission by the CO2 authorized account representative or alternate CO2 authorized account representative submitting such notice of delegation.

C. The department or its agent will assign a unique identifying number to each account established under subsection A or B of this section.

Following the establishment of a COATS account, all submissions to the department or its agent pertaining to the account, including submissions concerning the deduction or transfer of CO2 allowances in the account, shall be made only by the CO2 authorized account representative for the account.

9VAC5-140-6250. Recordation of CO2 allowance allocations.

A. By January 1 of each calendar year, the department or its agent will record in the following accounts:

1. In each CO2 budget source's and DMME's conditional allowance account, the CO2 conditional allowances allocated to those sources and DMME by the department prior to being consigned to auction; and

2. In each CO2 budget source's compliance account, the CO2 allowances purchased at auction by CO2 budget units at the source under 9VAC5-140-6210 A.

B. Each year the department or its agent will record CO2 allowances, as allocated to the unit under Article 5 (9VAC5-140-6190 et seq.) of this part, in the compliance account for the year after the last year for which CO2 allowances were previously allocated to the compliance account. Each year, the department or its agent will also record CO2 allowances, as allocated under Article 5 (9VAC5-140-6190 et seq.) of this part, in an allocation set-aside for the year after the last year for which CO2 allowances were previously allocated to an allocation set-aside.

C. Serial numbers for allocated CO2 allowances shall be managed as follows. When allocating CO2 allowances to and recording them in an account, the department or its agent will assign each CO2 allowance a unique identification number that will include digits identifying the year for which the CO2 allowance is allocated.

9VAC5-140-6260. Compliance.

A. CO2 allowances that meet the following criteria are available to be deducted for a CO2 budget source to comply with the CO2 requirements of 9VAC5-140-6050 C for a control period or an interim control period.

1. The CO2 allowances are of allocation years that fall within a prior control period, the same control period, or the same interim control period for which the allowances will be deducted.

2. The CO2 allowances are held in the CO2 budget source's compliance account as of the CO2 allowance transfer deadline for that control period or interim control period or are transferred into the compliance account by a CO2 allowance transfer correctly submitted for recordation under 9VAC5-140-6300 by the CO2 allowance transfer deadline for that control period or interim control period.

3. The CO2 allowances are not necessary for deductions for excess emissions for a prior control period under subsection D of this section.

B. Following the recordation, in accordance with 9VAC5-140-6310, of CO2 allowance transfers submitted for recordation in the CO2 budget source's compliance account by the CO2 allowance transfer deadline for a control period or interim control period, the department or its agent will deduct CO2 allowances available under subsection A of this section to cover the source's CO2 emissions, as determined in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part, for the control period or interim control period, as follows:

1. Until the amount of CO2 allowances deducted equals the number of tons of total CO2 emissions, or 0.50 times the number of tons of total CO2 emissions for an interim control period, determined in accordance with Article 8 (9VAC5-140-6330 et seq.) of this part, from all CO2 budget units at the CO2 budget source for the control period or interim control period; or

2. If there are insufficient CO2 allowances to complete the deductions in subdivision 1 of this subsection, until no more CO2 allowances available under subsection A of this section remain in the compliance account.

C. Identification of available CO2 allowances by serial number and default compliance deductions shall be managed as follows:

1. The CO2 authorized account representative for a source's compliance account may request that specific CO2 allowances, identified by serial number, in the compliance account be deducted for emissions or excess emissions for a control period or interim control period in accordance with subsection B or D of this section. Such identification shall be made in the compliance certification report submitted in accordance with 9VAC5-140-6170.

2. The department or its agent will deduct CO2 allowances for a control period from the CO2 budget source's compliance account, in the absence of an identification or in the case of a partial identification of available CO2 allowances by serial number under subdivision 1 of this subsection, as follows: Any CO2 allowances that are available for deduction under subdivision 1 of this subsection. CO2 allowances shall be deducted in chronological order (i.e., CO2 allowances from earlier allocation years shall be deducted before CO2 allowances from later allocation years). In the event that some, but not all, CO2 allowances from a particular allocation year are to be deducted, CO2 allowances shall be deducted by serial number, with lower serial number allowances deducted before higher serial number allowances.

D. Deductions for excess emissions shall be managed as follows.

1. After making the deductions for compliance under subsection B of this section, the department or its agent will deduct from the CO2 budget source's compliance account a number of CO2 allowances equal to three times the number of the source's excess emissions. In the event that a source has insufficient CO2 allowances to cover three times the number of the source's excess emissions, the source shall be required to immediately transfer sufficient allowances into its compliance account.

2. Any CO2 allowance deduction required under subdivision 1 of this subsection shall not affect the liability of the owners and operators of the CO2 budget source or the CO2 budget units at the source for any fine, penalty, or assessment, or their obligation to comply with any other remedy, for the same violation, as ordered under applicable state law. The following guidelines will be followed in assessing fines, penalties, or other obligations:

a. For purposes of determining the number of days of violation, if a CO2 budget source has excess emissions for a control period, each day in the control period constitutes a day in violation unless the owners and operators of the unit demonstrate that a lesser number of days should be considered.

b. Each ton of excess emissions is a separate violation.

c. For purposes of determining the number of days of violation, if a CO2 budget source has excess interim emissions for an interim control period, each day in the interim control period constitutes a day in violation unless the owners and operators of the unit demonstrate that a lesser number of days should be considered.

d. Each ton of excess interim emissions is a separate violation.

3. The propriety of the department's determination that a CO2 budget source had excess emissions and the concomitant deduction of CO2 allowances from that CO2 budget source's account may be later challenged in the context of the initial administrative enforcement, or any civil or criminal judicial action arising from or encompassing that excess emissions violation. The commencement or pendency of any administrative enforcement, or civil or criminal judicial action arising from or encompassing that excess emissions violation will not act to prevent the department or its agent from initially deducting the CO2 allowances resulting from the department's original determination that the relevant CO2 budget source has had excess emissions. Should the department's determination of the existence or extent of the CO2 budget source's excess emissions be revised either by a settlement or final conclusion of any administrative or judicial action, the department will act as follows:

a. In any instance where the department's determination of the extent of excess emissions was too low, the department will take further action under subdivisions 1 and 2 of this subsection to address the expanded violation.

b. In any instance where the department's determination of the extent of excess emissions was too high, the department will distribute to the relevant CO2 budget source a number of CO2 allowances equaling the number of CO2 allowances deducted which are attributable to the difference between the original and final quantity of excess emissions. Should such CO2 budget source's compliance account no longer exist, the CO2 allowances will be provided to a general account selected by the owner or operator of the CO2 budget source from which they were originally deducted.

E. The department or its agent will record in the appropriate compliance account all deductions from such an account pursuant to subsections B and D of this section.

F. Action by the department on submissions shall be as follows:

1. The department may review and conduct independent audits concerning any submission under the CO2 Budget Trading Program and make appropriate adjustments of the information in the submissions.

2. The department may deduct CO2 allowances from or transfer CO2 allowances to a source's compliance account based on information in the submissions, as adjusted under subdivision 1 of this subsection.

The department or its agent may, at its sole discretion and on its own motion, correct any error in any COATS account. Within 10 business days of making such correction, the department or its agent will notify the CO2 authorized account representative for the account.

9VAC5-140-6290. Closing of general accounts.

A. A CO2 authorized account representative of a general account may instruct the department or its agent to close the account by submitting a statement requesting deletion of the account from the COATS and by correctly submitting for recordation under 9VAC5-140-6300 a CO2 allowance transfer of all CO2 allowances in the account to one or more other COATS accounts.

B. If a general account shows no activity for a period of one year or more and does not contain any CO2 allowances, the department or its agent may notify the CO2 authorized account representative for the account that the account will be closed in the COATS 30 business days after the notice is sent. The account will be closed after the 30-day period unless before the end of the 30-day period the department or its agent receives a correctly submitted transfer of CO2 allowances into the account under 9VAC5-140-6300 or a statement submitted by the CO2 authorized account representative demonstrating to the satisfaction of the department or its agent good cause as to why the account should not be closed. The department or its agent will have sole discretion to determine if the owner or operator of the unit demonstrated that the account should not be closed.

Article 7 CO2 Allowance Transfers

9VAC5-140-6300. Submission of CO2 allowance transfers.

The CO2 authorized account representatives seeking recordation of a CO2 allowance transfer shall submit the transfer to the department or its agent. To be considered correctly submitted, the CO2 allowance transfer shall include the following elements in a format specified by the department or its agent:

1. The numbers identifying both the transferor and transferee accounts;

2. A specification by serial number of each CO2 allowance to be transferred;

3. The printed name and signature of the CO2 authorized account representative of the transferor account and the date signed;

4. The date of the completion of the last sale or purchase transaction for the allowance, if any; and

5. The purchase or sale price of the allowance that is the subject of a sale or purchase transaction under subdivision 4 of this section.

9VAC5-140-6310. Recordation.

A. Within five business days of receiving a CO2 allowance transfer, except as provided in subsection B of this section, the department or its agent will record a CO2 allowance transfer by moving each CO2 allowance from the transferor account to the transferee account as specified by the request, provided that:

2. The transferor account includes each CO2 allowance identified by serial number in the transfer.

B. A CO2 allowance transfer into or out of a compliance account that is submitted for recordation following the CO2 allowance transfer deadline and that includes any CO2 allowances that are of allocation years that fall within a control period prior to or the same as the control period to which the CO2 allowance transfer deadline applies will not be recorded until after completion of the process pursuant to 9VAC5-140-6260 B.

C. Where a CO2 allowance transfer submitted for recordation fails to meet the requirements of subsection A of this section, the department or its agent will not record such transfer.

9VAC5-140-6320. Notification.

A. Within five business days of recordation of a CO2 allowance transfer under 9VAC5-140-6310, the department or its agent will notify each party to the transfer. Notice will be given to the CO2 authorized account representatives of both the transferor and transferee accounts.

B. Within 10 business days of receipt of a CO2 allowance transfer that fails to meet the requirements of 9VAC5-140-6310 A, the department or its agent will notify the CO2 authorized account representatives of both accounts subject to the transfer of (i) a decision not to record the transfer and (ii) the reasons for such nonrecordation.

C. Nothing in this section shall preclude the submission of a CO2 allowance transfer for recordation following notification of nonrecordation.

Article 8 Monitoring, Reporting, and Recordkeeping

9VAC5-140-6330. General requirements.

A. The owners and operators, and to the extent applicable, the CO2 authorized account representative of a CO2 budget unit shall comply with the monitoring, recordkeeping, and reporting requirements as provided in this section and all applicable sections of 40 CFR Part 75. Where referenced in this article, the monitoring requirements of 40 CFR Part 75 shall be adhered to in a manner consistent with the purpose of monitoring and reporting CO2 mass emissions pursuant to this part. For purposes of complying with such requirements, the definitions in 9VAC5-140-6020 and in 40 CFR 72.2 shall apply, and the terms "affected unit," "designated representative," and "CEMS" in 40 CFR Part 75 shall be replaced by the terms "CO2 budget unit," "CO2 authorized account representative," and "CEMS," respectively, as defined in 9VAC5-140-6020. For units not subject to an acid rain emissions limitation, the term "administrator" in 40 CFR Part 75 shall be replaced with "the department or its agent." Owners or operators of a CO2 budget unit who monitor a non-CO2 budget unit pursuant to the common, multiple, or bypass stack procedures in 40 CFR 75.72(b)(2)(ii), or 40 CFR 75.16 (b)(2)(ii)(B) pursuant to 40 CFR 75.13, for purposes of complying with this part, shall monitor and report CO2 mass emissions from such non-CO2 budget unit according to the procedures for CO2 budget units established in this article.

B. The owner or operator of each CO2 budget unit shall meet the following general requirements for installation, certification, and data accounting.

2. Successfully complete all certification tests required under 9VAC5-140-6340 and meet all other requirements of this section and 40 CFR Part 75 applicable to the monitoring systems under subdivision 1 of this subsection.

3. Record, report, and quality-assure the data from the monitoring systems under subdivision 1 of this subsection.

C. The owner or operator shall meet the monitoring system certification and other requirements of subsection B of this section on or before the following dates. The owner or operator shall record, report, and quality-assure the data from the monitoring systems under subdivision B 1 of this section on and after the following dates:

1. The owner or operator of a CO2 budget unit, except for a CO2 budget unit under subdivision 2 of this subsection, shall comply with the requirements of this section by January 1, 2020.

2. The owner or operator of a CO2 budget unit that commences commercial operation July 1, 2020, shall comply with the requirements of this section by (i) January 1, 2021, or (ii) the earlier of 90 unit operating days after the date on which the unit commences commercial operation, or 180 calendar days after the date on which the unit commences commercial operation.

3. For the owner or operator of a CO2 budget unit for which construction of a new stack or flue installation is completed after the applicable deadline under subdivision 1 or 2 of this subsection by the earlier of (i) 90 unit operating days after the date on which emissions first exit to the atmosphere through the new stack or flue or (ii) 180 calendar days after the date on which emissions first exit to the atmosphere through the new stack or flue.

D. Data shall be reported as follows:

1. Except as provided in subdivision 2 of this subsection, the owner or operator of a CO2 budget unit that does not meet the applicable compliance date set forth in subsection C of this section for any monitoring system under subdivision B 1 of this section shall, for each such monitoring system, determine, record, and report maximum potential, or as appropriate minimum potential, values for CO2 concentration, CO2 emissions rate, stack gas moisture content, fuel flow rate, heat input, and any other parameter required to determine CO2 mass emissions in accordance with 40 CFR 75.31(b)(2) or (c)(3) or Section 2.4 of Appendix D of 40 CFR Part 75 as applicable.

2. The owner or operator of a CO2 budget unit that does not meet the applicable compliance date set forth in subdivision C 3 of this section for any monitoring system under subdivision B 1 of this section shall, for each such monitoring system, determine, record, and report substitute data using the applicable missing data procedures in Subpart D, or Appendix D of 40 CFR Part 75, in lieu of the maximum potential, or as appropriate minimum potential, values for a parameter if the owner or operator demonstrates that there is continuity between the data streams for that parameter before and after the construction or installation under subdivision C 3 of this section.

a. CO2 budget units subject to an acid rain emissions limitation or CSAPR NOX Ozone Season Trading Program that qualify for the optional SO2, NOX, and CO2 (for acid rain) or NOX (for CSAPR NOX Ozone Season Trading Program) emissions calculations for low mass emissions (LME) units under 40 CFR 75.19 and report emissions for such programs using the calculations under 40 CFR 75.19, shall also use the CO2 emissions calculations for LME units under 40 CFR 75.19 for purposes of compliance with these regulations.

b. CO2 budget units subject to an acid rain emissions limitation that do not qualify for the optional SO2, NOX, and CO2 (for acid rain) or NOX (for CSAPR NOX Ozone Season Trading Program) emissions calculations for LME units under 40 CFR 75.19 shall not use the CO2 emissions calculations for LME units under 40 CFR 75.19 for purposes of compliance with these regulations.

c. CO2 budget units not subject to an acid rain emissions limitation shall qualify for the optional CO2 emissions calculation for LME units under 40 CFR 75.19, provided that they emit less than 100 tons of NOX annually and no more than 25 tons of SO2 annually.

3. The owner or operator of a CO2 budget unit shall report net-electric output data to the department as required by Article 5 (9VAC5-140-6190 et seq.) of this part.

E. Prohibitions shall be as follows.

1. No owner or operator of a CO2 budget unit shall use any alternative monitoring system, alternative reference method, or any other alternative for the required CEMS without having obtained prior written approval in accordance with 9VAC5-140-6380.

2. No owner or operator of a CO2 budget unit shall operate the unit so as to discharge, or allow to be discharged, CO2 emissions to the atmosphere without accounting for all such emissions in accordance with the applicable provisions of this article and 40 CFR Part 75.

3. No owner or operator of a CO2 budget unit shall disrupt the CEMS, any portion thereof, or any other approved emissions monitoring method, and thereby avoid monitoring and recording CO2 mass emissions discharged into the atmosphere, except for periods of recertification or periods when calibration, quality assurance testing, or maintenance is performed in accordance with the applicable provisions of this article and 40 CFR Part 75.

4. No owner or operator of a CO2 budget unit shall retire or permanently discontinue use of the CEMS, any component thereof, or any other approved emissions monitoring system under this article, except under any one of the following circumstances:

a. The owner or operator is monitoring emissions from the unit with another certified monitoring system approved, in accordance with the applicable provisions of this article and 40 CFR Part 75, by the department for use at that unit that provides emissions data for the same pollutant or parameter as the retired or discontinued monitoring system; or

b. The CO2 authorized account representative submits notification of the date of certification testing of a replacement monitoring system in accordance with 9VAC5-140-6340 D 3 a.

9VAC5-140-6340. Initial certification and recertification procedures.

A. The owner or operator of a CO2 budget unit shall be exempt from the initial certification requirements of this section for a monitoring system under 9VAC5-140-6330 B 1 if the following conditions are met:

1. The monitoring system has been previously certified in accordance with 40 CFR Part 75; and

2. The applicable quality-assurance and quality-control requirements of 40 CFR 75.21 and Appendix B and Appendix D of 40 CFR Part 75 are fully met for the certified monitoring system described in subdivision 1 of this subsection.

B. The recertification provisions of this section shall apply to a monitoring system under 9VAC5-140-6330 B 1 exempt from initial certification requirements under subsection A of this section.

C. Notwithstanding subsection A of this section, if the administrator has previously approved a petition under 40 CFR 75.72(b)(2)(ii), or 40 CFR 75.16(b)(2)(ii)(B) as pursuant to 40 CFR 75.13 for apportioning the CO2 emissions rate measured in a common stack or a petition under 40 CFR 75.66 for an alternative requirement in 40 CFR Part 75, the CO2 authorized account representative shall submit the petition to the department under 9VAC5-140-6380 A to determine whether the approval applies under this program.

D. Except as provided in subsection A of this section, the owner or operator of a CO2 budget unit shall comply with the following initial certification and recertification procedures for a CEMS and an excepted monitoring system under Appendix D of 40 CFR Part 75 and under 9VAC5-140-6330 B 1. The owner or operator of a unit that qualifies to use the low mass emissions excepted monitoring methodology in 40 CFR 75.19 or that qualifies to use an alternative monitoring system under Subpart E of 40 CFR Part 75 shall comply with the procedures in subsection E or F of this section, respectively.

1. For initial certification, the owner or operator shall ensure that each CEMS required under 9VAC5-140-6330 B 1, which includes the automated DAHS, successfully completes all of the initial certification testing required under 40 CFR 75.20 by the applicable deadlines specified in 9VAC5-140-6330 C. In addition, whenever the owner or operator installs a monitoring system to meet the requirements of this article in a location where no such monitoring system was previously installed, initial certification in accordance with 40 CFR 75.20 is required.

2. For recertification, the following requirements shall apply.

a. Whenever the owner or operator makes a replacement, modification, or change in a certified CEMS under 9VAC5-140-6330 B 1 that the administrator or the department determines significantly affects the ability of the system to accurately measure or record CO2 mass emissions or to meet the quality-assurance and quality-control requirements of 40 CFR 75.21 or Appendix B to 40 CFR Part 75, the owner or operator shall recertify the monitoring system according to 40 CFR 75.20(b).

b. For systems using stack measurements such as stack flow, stack moisture content, CO2 or O2 monitors, whenever the owner or operator makes a replacement, modification, or change to the flue gas handling system or the unit's operation that the administrator or the department determines to significantly change the flow or concentration profile, the owner or operator shall recertify the CEMS according to 40 CFR 75.20(b). Examples of changes that require recertification include replacement of the analyzer, change in location or orientation of the sampling probe or site, or change of flow rate monitor polynomial coefficients.

3. The approval process for initial certifications and recertification shall be as follows: Subdivisions 3 a through 3 d of this subsection apply to both initial certification and recertification of a monitoring system under 9VAC5-140-6330 B 1. For recertifications, replace the words "certification" and "initial certification" with the word "recertification," replace the word "certified" with "recertified," and proceed in the manner prescribed in 40 CFR 75.20(b)(5) and (g)(7) in lieu of subdivision 3 e of this subsection.

a. The CO2 authorized account representative shall submit to the department or its agent, the appropriate EPA Regional Office and the administrator a written notice of the dates of certification in accordance with 9VAC5-140-6360.

b. The CO2 authorized account representative shall submit to the department or its agent a certification application for each monitoring system. A complete certification application shall include the information specified in 40 CFR 75.63.

c. The provisional certification date for a monitor shall be determined in accordance with 40 CFR 75.20(a)(3). A provisionally certified monitor may be used under the CO2 Budget Trading Program for a period not to exceed 120 days after receipt by the department of the complete certification application for the monitoring system or component thereof under subdivision 3 b of this subsection. Data measured and recorded by the provisionally certified monitoring system or component thereof, in accordance with the requirements of 40 CFR Part 75, will be considered valid quality-assured data, retroactive to the date and time of provisional certification, provided that the department does not invalidate the provisional certification by issuing a notice of disapproval within 120 days of receipt of the complete certification application by the department.

d. The department will issue a written notice of approval or disapproval of the certification application to the owner or operator within 120 days of receipt of the complete certification application under subdivision 3 b of this subsection. In the event the department does not issue such a notice within such 120-day period, each monitoring system that meets the applicable performance requirements of 40 CFR Part 75 and is included in the certification application will be deemed certified for use under the CO2 Budget Trading Program.

(1) If the certification application is complete and shows that each monitoring system meets the applicable performance requirements of 40 CFR Part 75, then the department will issue a written notice of approval of the certification application within 120 days of receipt.

(2) If the certification application is incomplete, then the department will issue a written notice of incompleteness that sets a reasonable date by which the CO2 authorized account representative shall submit the additional information required to complete the certification application. If the CO2 authorized account representative does not comply with the notice of incompleteness by the specified date, then the department may issue a notice of disapproval under subdivision 3 d (3) of this subsection. The 120-day review period shall not begin before receipt of a complete certification application.

(3) If the certification application shows that any monitoring system or component thereof does not meet the performance requirements of 40 CFR Part 75, or if the certification application is incomplete and the requirement for disapproval under subdivision 3 d (2) of this subsection is met, then the department will issue a written notice of disapproval of the certification application. Upon issuance of such notice of disapproval, the provisional certification is invalidated by the department and the data measured and recorded by each uncertified monitoring system or component thereof shall not be considered valid quality assured data beginning with the date and hour of provisional certification. The owner or operator shall follow the procedures for loss of certification in subdivision 3 e of this subsection for each monitoring system or component thereof, which is disapproved for initial certification.

(4) The department may issue a notice of disapproval of the certification status of a monitor in accordance with 9VAC5-140-6350 B.

e. If the department issues a notice of disapproval of a certification application under subdivision 3 d (3) of this subsection or a notice of disapproval of certification status under subdivision 3 d (3) of this subsection, then:

(1) The owner or operator shall substitute the following values for each disapproved monitoring system, for each hour of unit operation during the period of invalid data beginning with the date and hour of provisional certification and continuing until the time, date, and hour specified under 40 CFR 75.20(a)(5)(i) or 40 CFR 75.20(g)(7): (i) for units using or intending to monitor for CO2 mass emissions using heat input or for units using the low mass emissions excepted methodology under 40 CFR 75.19, the maximum potential hourly heat input of the unit; or (ii) for units intending to monitor for CO2 mass emissions using a CO2 pollutant concentration monitor and a flow monitor, the maximum potential concentration of CO2 and the maximum potential flow rate of the unit under Section 2.1 of Appendix A of 40 CFR Part 75.

(2) The CO2 authorized account representative shall submit a notification of certification retest dates and a new certification application in accordance with subdivisions 3 a and 3 b of this subsection; and

(3) The owner or operator shall repeat all certification tests or other requirements that were failed by the monitoring system, as indicated in the department's notice of disapproval, no later than 30 unit operating days after the date of issuance of the notice of disapproval.

E. The owner or operator of a unit qualified to use the low mass emissions excepted methodology under 9VAC5-140-6330 D 3 shall meet the applicable certification and recertification requirements of 40 CFR 75.19(a)(2), 40 CFR 75.20(h), and this section. If the owner or operator of such a unit elects to certify a fuel flow meter system for heat input determinations, the owner or operator shall also meet the certification and recertification requirements in 40 CFR 75.20(g).

F. The CO2 authorized account of each unit for which the owner or operator intends to use an alternative monitoring system approved by the administrator and, if applicable, the department under Subpart E of 40 CFR Part 75 shall comply with the applicable notification and application procedures of 40 CFR 75.20(f).

9VAC5-140-6350. Out-of-control periods.

A. Whenever any monitoring system fails to meet the quality assurance/quality control (QA/QC) requirements or data validation requirements of 40 CFR Part 75, data shall be substituted using the applicable procedures in Subpart D or Appendix D of 40 CFR Part 75.

B. Whenever both an audit of a monitoring system and a review of the initial certification or recertification application reveal that any monitoring system should not have been certified or recertified because it did not meet a particular performance specification or other requirement under 9VAC5-140-6340 or the applicable provisions of 40 CFR Part 75, both at the time of the initial certification or recertification application submission and at the time of the audit, the department or administrator will issue a notice of disapproval of the certification status of such monitoring system. For the purposes of this subsection, an audit shall be either a field audit or an audit of any information submitted to the department or the administrator. By issuing the notice of disapproval, the department or administrator revokes prospectively the certification status of the monitoring system. The data measured and recorded by the monitoring system shall not be considered valid quality-assured data from the date of issuance of the notification of the revoked certification status until the date and time that the owner or operator completes subsequently approved initial certification or recertification tests for the monitoring system. The owner or operator shall follow the initial certification or recertification procedures in 9VAC5-140-6340 for each disapproved monitoring system.

9VAC5-140-6360. Notifications.

The CO2 authorized account representative for a CO2 budget unit shall submit written notice to the department and the administrator in accordance with 40 CFR 75.61.

9VAC5-140-6370. Recordkeeping and reporting.

A. The CO2 authorized account representative shall comply with all recordkeeping and reporting requirements in this section, the applicable recordkeeping and reporting requirements under 40 CFR 75.73, and the requirements of 9VAC5-140-6080 E.

B. The owner or operator of a CO2 budget unit shall submit a monitoring plan in the manner prescribed in 40 CFR 75.62.

C. The CO2 authorized account representative shall submit an application to the department within 45 days after completing all CO2 monitoring system initial certification or recertification tests required under 9VAC5-140-6340, including the information required under 40 CFR 75.63 and 40 CFR 75.53(e) and (f).

1. The CO2 authorized account representative shall report the CO2 mass emissions data for the CO2 budget unit, in an electronic format prescribed by the department unless otherwise prescribed by the department for each calendar quarter.

2. The CO2 authorized account representative shall submit each quarterly report to the department or its agent within 30 days following the end of the calendar quarter covered by the report. Quarterly reports shall be submitted in the manner specified in Subpart H of 40 CFR Part 75 and 40 CFR 75.64. Quarterly reports shall be submitted for each CO2 budget unit, or group of units using a common stack, and shall include all of the data and information required in Subpart G of 40 CFR Part 75, except for opacity, heat input, NOx, and SO2 provisions.

3. The CO2 authorized account representative shall submit to the department or its agent a compliance certification in support of each quarterly report based on reasonable inquiry of those persons with primary responsibility for ensuring that all of the unit's emissions are correctly and fully monitored. The certification shall state that:

a. The monitoring data submitted were recorded in accordance with the applicable requirements of this article and 40 CFR Part 75, including the quality assurance procedures and specifications;

b. For a unit with add-on CO2 emissions controls and for all hours where data are substituted in accordance with 40 CFR 75.34(a)(1), the add-on emissions controls were operating within the range of parameters listed in the QA/QC program under Appendix B of 40 CFR Part 75 and the substitute values do not systematically underestimate CO2 emissions; and

c. The CO2 concentration values substituted for missing data under Subpart D of 40 CFR Part 75 do not systematically underestimate CO2 emissions.

9VAC5-140-6380. Petitions.

A. Except as provided in subsection C of this section, the CO2 authorized account representative of a CO2 budget unit that is subject to an acid rain emissions limitation may submit a petition to the administrator under 40 CFR 75.66 and to the department requesting approval to apply an alternative to any requirement of 40 CFR Part 75. Application of an alternative to any requirement of 40 CFR Part 75 is in accordance with this article only to the extent that the petition is approved in writing by the administrator, and subsequently approved in writing by the department.

B. Petitions for a CO2 budget unit that is not subject to an acid rain emissions limitation shall meet the following requirements.

1. The CO2 authorized account representative of a CO2 budget unit that is not subject to an acid rain emissions limitation may submit a petition to the administrator under 40 CFR 75.66 and to the department requesting approval to apply an alternative to any requirement of 40 CFR Part 75. Application of an alternative to any requirement of 40 CFR Part 75 is in accordance with this article only to the extent that the petition is approved in writing by the administrator and subsequently approved in writing by the department.

2. In the event that the administrator declines to review a petition under subdivision 1 of this subsection, the CO2 authorized account representative of a CO2 budget unit that is not subject to an acid rain emissions limitation may submit a petition to the department requesting approval to apply an alternative to any requirement of this article. That petition shall contain all of the relevant information specified in 40 CFR 75.66. Application of an alternative to any requirement of this article is in accordance with this article only to the extent that the petition is approved in writing by the department.

C. The CO2 authorized account representative of a CO2 budget unit that is subject to an acid rain emissions limitation may submit a petition to the administrator under 40 CFR 75.66 and to the department requesting approval to apply an alternative to a requirement concerning any additional CEMS required under the common stack provisions of 40 CFR 75.72 or a CO2 concentration CEMS used under 40 CFR 75.71(a)(2). Application of an alternative to any such requirement is in accordance with this article only to the extent the petition is approved in writing by the administrator and subsequently approved in writing by the department.

9VAC5-140-6390. (Reserved.)

9VAC5-140-6400. (Reserved.)

Article 9 Auction of CO2 CCR and ECR Allowances

9VAC5-140-6410. Purpose.

The following requirements shall apply to each allowance auction. The department or its agent may specify additional information in the auction notice for each auction. Such additional information may include the time and location of the auction, auction rules, registration deadlines, and any additional information deemed necessary or useful.

9VAC5-140-6420. General requirements.

A. The department's agent will include the following information in the auction notice for each auction:

1. The number of CO2 allowances offered for sale at the auction, not including any CO2 CCR allowances;

2. The number of CO2 CCR allowances that will be offered for sale at the auction if the condition of subdivision 1 of this subsection is met;

3. The minimum reserve price for the auction;

4. The CCR trigger price for the auction;

5. The maximum number of CO2 allowances that may be withheld from sale at the auction if the condition of subdivision D 1 of this section is met; and

6. The ECR trigger price for the auction.

B. The department's agent will follow these rules for the sale of CO2 CCR allowances.

1. CO2 CCR allowances shall only be sold at an auction in which total demand for allowances, above the CCR trigger price, exceeds the number of CO2 allowances available for purchase at the auction, not including any CO2 CCR allowances.

2. If the condition of subdivision 1 of this subsection is met at an auction, then the number of CO2 CCR allowances offered for sale by the department or its agent at the auction shall be equal to the number of CO2 CCR allowances in the Virginia auction account at the time of the auction.

3. After all of the CO2 CCR allowances in the Virginia auction account have been sold in a given calendar year, no additional CO2 CCR allowances will be sold at any auction for the remainder of that calendar year, even if the condition of subdivision 1 of this subsection is met at an auction.

4. At an auction in which CO2 CCR allowances are sold, the reserve price for the auction shall be the CCR trigger price.

5. If the condition of subdivision 1 of this subsection is not satisfied, no CO2 CCR allowances shall be offered for sale at the auction, and the reserve price for the auction shall be equal to the minimum reserve prices.

C. The department's agent shall implement the reserve price as follows: (i) no allowances shall be sold at any auction for a price below the reserve price for that auction and (ii) if the total demand for allowances at an auction is less than or equal to the total number of allowances made available for sale in that auction, then the auction clearing price for the auction shall be the reserve price.

D. The department's agent will meet the following rules for the withholding of CO2 ECR allowances from an auction.

1. CO2 ECR allowances shall only be withheld from an auction if the demand for allowances would result in an auction clearing price that is less than the ECR trigger price prior to the withholding from the auction of any ECR allowances.

2. If the condition in subdivision 1 of this subsection is met at an auction, then the maximum number of CO2 ECR allowances that may be withheld from that auction will be equal to the quantity shown in Table 140-5B of 9VAC5-140-6210 E minus the total quantity of CO2 ECR allowances that have been withheld from any prior auction in that calendar year. Any CO2 ECR allowances withheld from an auction will be transferred into the Virginia ECR Account.

9VAC5-140-6430. Consignment auction.

In accordance with Article 5 (9VAC5-140-6190 et seq.) of this part, conditional allowances shall be consigned by the CO2 budget source to whom they are allocated or DMME to each auction on a quarterly pro rata basis in accordance with procedures specified by the department. At the completion of the consignment auction, a conditional allowance shall become an allowance to be used for compliance purposes.